Calculating Price Ceilings

Unit 4 - Lesson 9
Learning outcomes:
● Calculate the effects of a price ceiling on the stakeholders in the market.
(AO4)
Calculate the effects of a price ceiling on the stakeholders in the market.
(AO4)

Calculating the amount of shortage

Formula

Shortage ● Find the quantity

(excess demanded at the
demand) price ceiling.
● Find the quantity (Qd - Qs)
supplied at the price
ceiling.
● Subtract the
difference between
the quantity
demanded and
quantity supplied to
calculate the amount
of shortage.
Calculate the effects of a price ceiling on the stakeholders in the market.
(AO4)

Change in Consumer Expenditure

No Price Price Ceiling

Control

Consumer Pe X Qe (Price Ceiling) X Qs

Expenditure

To find the change in consumer expenditure (CE):

CE (no price control) minus CE (price ceiling)

Equals change in consumer expenditure

Calculate the effects of a price ceiling on the stakeholders in the market.
(AO4)

Change in producer revenue

No Price Price Ceiling

Control

Producer Pe X Qe (Price Ceiling) X Qs

Revenue

To find the change in producer revenue (PR):

PR (no price control) minus PR (price ceiling)

Equals change in producer revenue

Will be equal to the consumer expenditure

Calculate the effects of a price ceiling on the stakeholders in the market.
(AO4)

Change in producer surplus

No Price Price Ceiling

Control

Producer (Pe minus (Price Ceiling minus

Surplus P-int) X Qe P-int) X Qs divided by
divided by 2 2

To find the change in producer surplus (PS):

PS (no price control) minus PS (price ceiling)

Equals change in producer surplus

Calculate the effects of a price ceiling on the stakeholders in the market.
(AO4)

Change in consumer surplus

No Price Price Ceiling

Control

Consumer (P-int minus (A + B) = Area of a

Surplus Pe) X Qe) trapezium
divided by 2
Sum of the two parallel
sides X distance
between them divided
by 2

Change in consumer surplus (CS) is equal to CS

(no price control) minus CS (price ceiling)
Calculate the effects of a price ceiling on the stakeholders in the market.
(AO4)

Total Welfare Loss (C + D)

No Price Control

Total Welfare Loss Area of the right triangle (C + D)

Length X Width divided by 2