Price Ceilings and Price Floors

What is the difference between an effective price ceiling and an ineffective price ceiling?

-Effective: Set below the equilibrium price -Ineffective: Set at or above the equilibrium price

What is a price ceiling?

. The highest price that may be charged by law. An effective price ceiling is a price that is set by the government below the equilibrium price.

What is the difference between an effective and ineffective price floor?

Effective- Price set above the equilibrium price Ineffective- Price set at or above the equilibrium price

What happens to the market when an effective price ceiling is imposed?

Quantity demanded exceeds quantity supplied

What happens to the market when an effective price floor is imposed?

Quantity demanded exceeds quantity supplied

What is a price floor?

The lowest price that may be charged by law. An effective price floor is a price that is set by the government above the equilibrium price.