Government interference with equilibrium prices Flashcards
1
Q
What does the government have the power to do
A
Artificially set the price in any particular market
2
Q
What is a ceiling price
A
If the government sets a maximum price for a g/s it is termed a ceiling price
Price ceiling= maximum price
3
Q
What is a price floor
A
When a minimum price is stipulated, this is termed a price floor
Price floor= minimum price
4
Q
What is the objective of government interference with equilibrium prices
A
- To promote affordability so that consumers are able to purchase essential g/s (price ceiling
- To increase wages or the price of labor in the labor market
- Price stability
