Answered: Explain the likely effects of a price…

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Economics

Explain the likely effects of a price ceiling

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Explain the likely effects of a price ceiling

Pls provides examples and diagram

Video Definition Video Definition Government regulation setting a maximum price a business may charge for a given good or service. A price ceiling itself does not cause demand or supply to change. It is simply a mechanism used to set a price that can be legally charged in the market. Price ceilings are often implemented during times of crisis to avoid price gouging.

Expert Solution

Step 1

Price controls are used by the government to attain certain economic goals. The two types of price controls that are generally used are price floor and price ceiling.

The price floor sets the minimum price at which a certain good can be sold in the market. Price ceiling sets a maximum price at which a good can be sold.

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