Answer to Question #252685 in Microeconomics for Sumshiv

Question

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

Answer 1

Price ceiling helps to prevent the price from rising to a certain level. It helps to regulate the maximum pricing that suppliers can charge for a certain commodity. In this case the consumers are the beneficiaries because price ceiling ensures that the prices are affordable.

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