price floor or a price ceiling
Whenever you have a problem with a price floor or a price ceiling, do not assume that it will always be effective. This solution will address how to determine if a price floor or ceiling is effective or not, what it looks like, it's purpose, and how to determine whether you need to use a price floor or a price ceiling in a given situation.
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Whenever I have a problem with a price floor or ceiling, I always think of a drawing my Microeconomic Theory professor showed us. (See file attached "adamsmith"). The drawing shows four graphs, two with a price floor and two with a price ceiling. For both the floor and ceiling, in either case, one was drawn ...
Solution Summary
Determine whether you need to use a price floor or a price ceiling in a given situation.
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