Price floors Flashcards
What happens to consumer surplus when price increases?
It decreases.
What is consumer surplus?
Consumer surplus is the difference between what a consumer is willing to pay for a good and what he actually pays for a product
What is producer surplus?
Producer surplus indicates the difference between the market price of a good and the value at which producer is willing to provide a good in the market.
What is maximum price and why is it imposed?
Maximum price is imposed by the government in order to support the consumers and is always placed below the equilibrium price in order to be effective.
What is minimum price and why is it imposed?
Minimum price is always imposed by the government to benefit the producers in order to encourage the production of a particular product.
Where is maximum price placed on demand/supply curve?
Below the equilibrium point.
Where is minimum price placed on demand/supply curve?
Above the equilibrium point.
Who benefits from maximum and minimum price?
Maximum: Consumers
Minimum: Producers
