Question+5

Governments often influence by implementing a price flooring or ceiling. A price ceiling is the maximum price that business may charge for a product in the market. This results lower quantity supplied and higher quantity demanded. They use establish a price ceiling to make it more affordable for others by reducing the cost to the consumer for a certain product or service in the market. Such as rent, gasoline prices or doctor fees. A price flooring however is the opposite of price ceiling which is the minimum price that business may charge for a product in the market, this point is usually above the market equilibrium point. This results in lower quantity demanded and higher quantity supplied. An example would be the minimum wage market which would affect the amount of workers in the market and cause unemployment by implementing a price flooring or in this case a minimum wage. This unemployment would be the cause of higher costs of factors of production on the business. Causing them to reduce factors of production, thus firing workers and causing unemployment. The affect of both price controls can be seen in the diagram below:

The use of price controls allows government officials to control the market in the way they want it, by either making goods more affordable or expensive to consumers of the market.