Answer to Question #249106 in Microeconomics for Aishwarya

Question

Why does government impose price celling and price floor on certain commodity ? Who are benfier for both

Answer 1

Price ceiling is a measure that helps in preventing a price from rising above a certain level.It controls the maximum prices which can be charged by suppliers for given goods. The beneficiaries of price ceiling are the consumers. This is because commodities are kept at prices that are affordable to them.

Price floor is a measure that helps in keeping prices from falling below a given level. In this case, the government enters the market and buys up the commodity hence building up on demand and thus keeping prices higher than they would otherwise be. The beneficiaries in this case are the producers.