Answer to Question #268197 in Microeconomics for Mussu

Question

Where does government import price floor and price in a certain communities who are the beneficiaries of both.

Answer 1

Price floor is used when the government wants to keep a price from falling below a given level. The government in this case will enter the market and buy up the available product thus adding up on demand which helps in keeping the price higher than it would otherwise be. The beneficiaries of price floors are producers.

Price ceiling is imposed when the government wants to keep a price from rising above a certain level. The government does this by controlling the maximum prices that can be charged by suppliers for the given commodity. The beneficiaries of price ceiling are consumers because it helps in ensuring that commodities are affordable.