What is Price Control?
- It is a mandated price for a good
- A legal restriction set by the government on how high or low a market price will go
- Two types of price adjustments, price ceiling and price floor
- Price ceiling is a government policy that sets the legal maximum price that can be charged for a certain good. This often causes a shortage in such good
- Price floor is a government policy that sets the minimum price that can be charged, often leads to a surplus in goods
How do I remember it?
When you think of price control, think of how prices go up and down. A ceiling being the highest you can reach, and the floor being the lowest you can reach, those are the restrictions set by government policies to control prices on goods.
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