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Price Ceiling in the World of Economics – Impacts and Illustrations

by Apr 4, 2018Homework Answers

I hail from countryside, where there were big old houses acquiring large areas, to a larger extent. With the passage of time, the population started to become meager, and most of the inhabitants decided to leave for an urban way of life with a different lifestyle.
Now in the urban areas, most newcomers started to live in rent giving a fixed sum every month, but to everyone’s doubts, the amounts were uniform and never exceeded each other, irrespective of the owner’s desire. The government has fixed the maximum price or the upper limit of the rent structure. This phenomenon of a decided upper limit by the government is called price ceiling in the terms of economics.
The definition of price ceiling is, therefore – “an upper limit price imposed by governmental laws, on goods and services; economically stating that no one can sell or deal in such goods and services for a higher price than the set limit is known as price ceiling homework answers.”
The impact of price ceiling homework answers in economics  
You guys must like bread items. They go with every other item, such as jams, jellies, eggs, vegetables and the list goes on. So, you buy one loaf of bread for 2 $, and such a price attracts 200 customers. Now if the price is increased to 5 $, the number of customers shall drastically decrease to, say 40. For attracting 100 plus customers, a static market rate would be around 3.25 $, supposedly.
Now considering 3.25 $ as natural market price, government decide to set the price ceiling at 3.5 $. In this case, no impact on market supplies and demands would be seen. The effect on economics perspective is not seen. However, the price ceiling homework answers tend to have an impact when the price ceiling is placed below 3.5 $.
Market equilibrium is a concept when the prices are set at equal position for the sellers and producers to supply, and the customers to be willing and able to consume. Equilibrium is, therefore, the intersecting point of supplies and demands according to economics perspective. Considering the bread example, 3.5 $ is the equilibrium price. Therefore, a price ceiling to be effective, it must be set below the equilibrium price.
The major objective of price ceiling homework answers is to protect the consumers from unaffordable and unreasonable prices, and safeguarding their interests by imposing a fixed maximum price on goods, commodities, and services.
The shortage in supplies due to price ceiling
Suppose that you go to live in some city called Townsville, where the price ceiling is set at 1500 $ for every flat, irrespective of customers’ position and status. In a few years’ time, Townsville becomes a popular and attractive place to settle in, with the natural market prices tower topping up to 2500 $.
But as the upper limit is fixed, and because of the higher demands, the flats would be rented out completely, creating “shortage” in the market. If the government would have allowed the prices to float accordingly, the demand would be a little lower hence matching the supplies and demands perfectly.
Shortage is linked directly with the price ceiling homework answers. If the price ceiling has been set below the equilibrium price, too many consumers would be able to afford the commodity, creating an imbalance between supply and demand i.e. demand shall be greater than supply, thus creating shortages.
In the Townsville example, if the price ceiling is contrary to the market price, the owners shall be deprived of the well deserved 1000 $ extra amount, which is clearly been wasted. Due to this, his eagerness to improve the flats shall also be least.
The difference between price ceiling and price floors
Both are governmental impositions to keep a check on prices and safeguarding the interests of the customers. The basic difference between the two is that in price floors, the lower limit i.e. the minimum price at which a commodity is sold is set, unlike the upper limit in price ceiling homework answers. As price ceiling creates more demand, price floors create surpluses, as increasing the prices attract lesser customers.
Some examples of price ceiling

  • New York rent control was first seen when the soldiers of the World War II stopped receiving military pay and were having too much trouble in paying their rents. The rent ceiling techniques have since been a must do for the government, binding the concept legally.
  • Salary window in sports is another example where a maximum limit is fixed, and cannot be crossed.

What happens if the price ceiling is below the natural market prices?
In vehicular industries, the natural market price of a car maybe 30,000 $, but the price ceiling can be found to be set at 80,000 $. What happens now is that an undue advantage is given unknowingly to the hands of the producers, sellers, and distributors. The consequences are black markets, cartels, and high price add-ons.
The cons of price ceiling
You must have heard about the 1970 Gasoline shortage incident which created chaos in the affected areas, especially markets. What happened is that the government, in spite of increasing market prices, set the price ceiling at a lower price, creating too many customers, long lines, and harassment on the part of the consumer.
If the market flow would be maintained, such havoc might have been avoided. Therefore, shortage was created, implying terrible market conditions.
Guys, regulators impose price ceiling for the betterment of the consumers, but the variability often leads to disadvantages. However, price ceiling enables the common mass to afford commodities which might have been out of their reach if the owners were to decide the prices altogether.
The conclusion
With advantages, certain disadvantages like shortage of goods, invalid regulation of fees and unfulfilled demands also arise. However, the price ceiling homework answers safeguard customers from ill treatments and higher prices as well. The answer to the question “How can we afford such high priced flats?” is price ceiling. Believe in the government and hope the government believes in the market; it may create an economy. Cheers.