1.

Buyer-Seller Dynamics:
o Buyers typically desire lower prices, while sellers aim for higher prices.
o The equilibrium price, where supply and demand intersect, is a crucial reference
point.
2. Price Ceiling:
o A price ceiling is a legally imposed maximum price at which a good or service
can be sold.
o It prevents prices from rising above a certain level.
o Common examples include rent control and maximum gasoline prices during
emergencies.
3. Effects of Price Ceilings:
o When a price ceiling is set below the equilibrium price:
 Shortages may occur because quantity demanded exceeds quantity
supplied.
 Allocative inefficiency arises as some willing buyers are unable to
purchase the good.
 Black markets may emerge, where goods are exchanged illegally at
higher prices.
4. Price Floors:
o A price floor is a legally imposed minimum price.
o It prevents prices from falling below a certain level.
o Examples include minimum wage laws.
5. Effects of Price Floors:
o When a price floor is set above the equilibrium price:
 Surpluses may occur because quantity supplied exceeds quantity
demanded.
 Some sellers may be unable to sell their goods.
 Allocative inefficiency results as some willing buyers are priced out of the
market.