Maximum Price
A maximum price is set by the government below the existing free market equilibrium price & sellers cannot legally sell the good/service at a higher price
Governments will often use maximum prices in order to help consumers. Sometimes they are used for long periods of time e.g. housing rental markets. Other times they are short-term solutions to unusual price increases e.g. petrol
Minimum Price
A minimum price is set by the government above the existing free market equilibrium price & sellers cannot legally sell the good/service at a lower price
Governments will often use minimum prices in order to help producers or to decrease consumption of a demerit good e.g. alcohol
Can you provide real-world examples where a price floor has been implemented, and what were the outcomes?
How might a price ceiling lead to shortages, and what are the possible consequences for consumers and producers?
In what ways can a price floor result in surpluses, and how can governments address these surpluses?
Why might policymakers decide to implement price controls, and what are the ethical considerations involved?
How do price controls interact with supply and demand principles in a free market?
What are the potential advantages and disadvantages of imposing a price ceiling on essential goods?