Difference Between Price Floor And Price Ceiling. The floor price is the least price that a seller would get for the product. Rationalization Of The Difference Between A Price Floor A Price Ceiling.
Thus it is important for governments to be mindful of a goods price elasticity when setting price floors trying to protect vulnerable suppliers. A price ceiling creates a shortage when the legal price is below the market equilibrium price but has no effect on the quantity supplied if the legal price is above the market equilibrium price. Price ceilings are government enacted laws preventing suppliers from establishing prices of key resources higher than a certain price which is set by the government.
What is the difference between a price ceiling and a price floor.
A price ceiling is the legal maximum price for a good or service while a price floor is the legal minimum price. Price ceilings and price floors are essential aspects of our economy. When a price ceiling is set below the equilibrium price quantity demanded will exceed quantity supplied and excess demand or shortages will result. As you might expect price ceilings act to limit prices from rising too high whereas price floors act to limit prices from falling.
