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What are price controls?

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What are price controls? What is the effect of price controls on the market and market equilibrium.

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Solution Summary

This solution defines price controls and discusses the effect of price controls on the market and market equilibrium.

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There are usually two types of price controls: the price ceiling and the price floor.

The price floor is a regulation that sets a limit on how low prices of a certain good/service can be. The price ceiling, on the other hand, is the limit of how high prices can be.

An example of price floor is minimum wage (i.e. the ...

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