Government Set Prices Flashcards
1
Q
What is a price CEILING?
A
the MAXIMUM legal price a SELLER may charge
2
Q
Where is the price CEILING according to the equilibrium?
A
typically BELOW equilibrium
3
Q
What is a price FLOOR?
A
the MINIMUM legal price a SELLER may charge
4
Q
Where is the price FLOOR according to the equilibrium?
A
typically ABOVE equilibrium
5
Q
What sometimes happens because of a price ceiling?
TRICK: SHORT people DEMAND EXcess height to reach the ceiling
ALSO: below the equilibrium, give rule
A
SHORTAGES; quantity demanded exceeds quantity supplied
TRICK explained: SHORTAGE, quantity DEMANDED EXceeds…
ALSO explained: below equilibrium = shortage
6
Q
What sometimes happens because of a price floor?
A
SURPLUSES; quantity supplied exceeds quantity demanded
