Price Controls - Ceilings and Floors - Explained
What are Price Controls?
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What are Price Controls?
Price controls, as the name implies, seeks to regulate or control prices in the economy. They come in the forms of price ceilings and price floors.
What is a Price Ceiling?
A price ceiling is the maximum allowed under the law to be charged for a good or service.
Price ceilings often seek to protect lower and middle income individuals in the market. The most common type is rent control.
What are Price Floors?
Price floors, or price support, is a law setting the minimum price that can be paid for a good or service. This type of law seeks to protect individuals in a socio-economic class or to protect entire industries.
An example of a price floor is the national minimum wage for services performed by an employee. Another example would be a price floor placed on imported foreign goods (or anti-dumping regulations).
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