Diagrams

• Market equilibrium (or Market Clearing Price)

  
• A: Consumer Surplus

  B: Producer Surplus

  
• Price Ceiling - A maximum price set by the government to support households

  
• Price Floor - A minimum price set by the government to support firms

  
• Introducing a price floor has led to a quantity supplied higher than the quantity demanded. This means that there is a surplus.

  
• Introducing a price ceiling has led to a quantity demanded higher than the quantity supplied. This means that there is a shortage.

  
• Value of Price Elasticity