1.20 Maximum And Minimum Peicing Flashcards
1
Q
Define maximum price
A
A price set below the market equilibrium price by the government
The price ceiling - merit goods
2
Q
Define minimum price
A
A price set above the market equilibrium price by the government
Price floor - demerit goods
3
Q
What is the difference between minimum and maximum price
A
Maximum price is set below the equilibrium and is to encourage people whereas minimum price is set above equilibrium and is used to deter people
4
Q
Diagram for maximum price
A
Check notion - same as excess demand diagram
5
Q
Diagram for minimum price
A
Check notion - diagram same as excess supply
6
Q
Advantages of maximum prices
A
Prices are lowered for consumers
