Maximum Price (Price Ceiling)

Cards (6)

What is a maximum price?:
It occurs when the government sets a price below the equilibrium price to encourage output and consumption.
Where is the maximum price set?
below the equilibrium price
A price ceiling can be used to protect the interest of consumers from soaring prices, such as escalating rents or food prices.
Why do Governments Impose Maximum Prices?:
To improve the affordability of essential goods and services like housing or food.
Reduce income inequality
Why do Governments Impose Maximum Prices?:
To improve the affordability of essential goods and services like housing or food.
Reduce income inequality
What does a maximum price create?
excess demand