Answer to Question #250732 in Microeconomics for Kaunain

Question

Why does government impose price celling and price floor on certain commodities ?Who are the beneficiaries of both

Answer 1

A price ceiling prevents a price from rising beyond a certain point. It regulates the maximum pricing that suppliers can charge for a certain commodity. This is advantageous to the general public (consumers) since it ensures that the product is affordable.

The price floor prevents the price from falling below a certain level. Producers are the beneficiaries in this scenario. The government enters the market and purchases the commodity, so increasing demand and allowing prices to remain higher than they would otherwise be.