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    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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    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 ...

    Solution Summary

    Effects of price control and distinguishing price floors and ceilings are discussed in this solution.