Why Might The Government Establish This Price Ceiling

Thousands of bushels demanded price per bushel thousands of bushels supplied 85 3 40 71 80 3 70 73 75 4 00 75 70 4 30 77 65 4 60 79 60 4 90 81 suppose that the government establishes a price ceiling of 3 70 for wheat.

Why might the government establish this price ceiling. The intended purpose of a price ceiling is to protect the consumers from conditions that would make a vital product from being financially unattainable for consumers. Why might the government establish this price ceiling. Why might the government establish this price ceiling.

What will be the main effect of this price floor. A price ceiling creates deadweight loss an ineffective outcome. To control food prices.

Price ceiling is a government mandated limit on the price that can be charged for a given product such as a utility or electricity. When a price ceiling is set a shortage occurs. In order for a price ceiling to be effective it must be set below the natural market equilibrium.

A price ceiling is a government or group imposed price control or limit on how high a price is charged for a product commodity or service. In the diagram below draw this price ceiling established at 3. Governments use price ceilings to protect consumers from conditions that could make commodities prohibitively expensive.

An example of a price ceiling in the united states is rent control. For the price that the ceiling is set at there is more demand than there is at the equilibrium price. Although both a price ceiling and a price floor can be imposed the government usually only selects either a ceiling or a floor for particular goods or services.

Although deadweight loss is created the government establishes a price ceiling to protect consumers. Price ceilings represent established maximums on a price. A price ceiling occurs when the government puts a legal limit on how high the price of a product can be.