ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A price ceiling is the mandated maximum amount a seller is allowed to charge for a product or service. Usually set by law, price ceilings are typically applied to staples such as food and energy products when such goods become unaffordable to regular consumers. A price ceiling is essentially a type of price control.

Detailed explanation-2: -A price ceiling keeps a price from rising above a certain level-the “ceiling”. A price floor keeps a price from falling below a certain level-the “floor”. We can use the demand and supply framework to understand price ceilings. In many markets for goods and services, demanders outnumber suppliers.

Detailed explanation-3: -A price ceiling is the maximum price of a good which sellers can expect from buyers. This price is fixed by the government and is lower than the equilibrium market price of a good(OPe). Hence, the price ceiling leads to the excess of demand and contract of supply.

Detailed explanation-4: -Definition: Price ceiling (maximum price) – the highest possible price that producers are allowed to charge consumers for the good/service produced/provided set by the government. It must be set below the equilibrium price to have any effect.

Detailed explanation-5: -Price ceiling refers to the mechanism by which the price for a good is prevented from rising to a certain level. In contrast to that, price floor is the mechanism by which the price of a good is prevented from falling below a certain level.