Effects of price control
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Explain the difference between a price floor and a price ceiling. Provide a situation in which a price ceiling may be used. What are the effects of this price control on the equilibrium price and quantity?
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Solution Summary
Effects of price control and distinguishing price floors and ceilings are discussed in this solution.
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A price floor sets a minimum legal price for a particular good, while a price ceiling sets a maximum allowable price. Any price below that is acceptable, but it would be illegal to charge more. Price ceilings are used in situations ...
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