Price Mechanism

Price Controls:
Price Ceilings & Price Floors
Price Control: Price Ceiling
Price ceiling (Below Equilibrium)
Price ceiling is the maximum legal price,
set by the government, that consumers
P S
are expected to pay for a good.

$10
This is aimed at helping consumers.

Price Ceiling: $5 But it will cause the market to be in

Maximum legal D
price disequilibrium: shortage (QD > QS)
10 30 50 Q
Price Control: Price Ceiling
Price Floor (Above Equilibrium)
Price floor is the minimum legal price,
set by the government, that consumers
P S
are expected to pay for a good.
Price Floor: $15
Minimum legal
price
$10
This is aimed at helping the producers.

But it will cause the market to be in

D
disequilibrium: surplus (QD < QS)
20 40 60 Q