Price Controls (Ceilings / Floors)

Price Ceiling: An imposed maximum price for a good or service. 

• If EP is considered too high. 
• Set below EP
• Supposed to help consumers
• Example: rent control 
• Results in shortage
• Other side effects? 

Price Floor: An imposed minimum price for a good or service. 

• If EP is too low considered too low. 
• Set above EP
• Supposed to help producers 
• Example: food price controls 
• results in surplus  

To keep it simple on your notes....
Price Ceilings = Shortages
Price Floors = Surpluses