ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Price ceilings are inefficient because they lead to wasted resources since they increase the amount of time consumers must search for the price-controlled good.

Detailed explanation-2: -While they make staples affordable for consumers in the short term, price ceilings often carry long-term disadvantages, such as shortages, extra charges, or lower quality products. Economists worry that price ceilings cause a deadweight loss to an economy, making it more inefficient.

Detailed explanation-3: -A price ceiling is said to be ineffective if it does not change the choices of market participants. As illustrated above, an ineffective (price) ceiling is created when the ceiling price is above the equilibrium price.

Detailed explanation-4: -An effective price ceiling will lower the price of a good, which decreases the producer surplus. The effective price ceiling will also decrease the price for consumers, but any benefit gained from that will be minimized by the decreased sales due to the drop in supply caused by the lower price.

Detailed explanation-5: -A price ceiling is a maximum price at which a seller can offer its good or service. That is to say, the upper limit price at equilibrium. An effective price ceiling is established below the market price. At this point, the quantity demanded will exceed the quantity supplied.