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Welcome to the Q&A for ECN/APEC 2010, where you can ask questions and receive answers from your fellow students, the TA, and your professor.

Please only ask questions about the material for the course. Try to create discussions about the material we see in class, instead of just thinking of economics in general (this is an introduction to microeconomics class, not a policy or government class).

For questions and discussions about course organization or other course related topics, come see us after class or during office hours.

Feel free to discuss quiz questions on the Q&A, but do not provide direct answers to quiz questions before the quiz's due date.

Chapter 8: price floors & ceilings

+1 vote
82 views

The textbook says that when there is a price floor there will always be a surplus, and always a shortage for price ceilings. I'm confused on this because when we have problems with a graph, it seems like there could occasionally still be a surplus when there is a price ceiling. So, if there was a surplus for a price ceiling, would it go away right away from natural forces? 

asked May 1 by canvas-ff0a5d8c6a5bb (196 points)

2 Answers

+2 votes

The way I understand it, if a price ceiling is set above the market equilibrium, that's just the highest price possible, not the required. The market equilibrium will still be the price and quantity that goods will be traded at. The same goes for a price floor; if it's set below the market equilibrium, it won't really affect the price or quantity of the good sold.

answered May 1 by canvas-035e4312313a4 (135 points)
0 votes
Yes it would most likely go away. But it is not very likely to ever happen because a price ceiling is most commonly implemented when a good is being raised in price and the ceiling stops this price raise causing less to be supplied and creates a shortage. The opposite is true for a price floor. The price is driven down by the market and the price floor is implemented to stop the drop, but consumers stop buying the item because they don't feel it is worth it and the result is a surplus. Floors are almost always above the market equilibrium and ceilings are almost always below, causing these problems.
answered May 1 by canvas-dd5de7760375e (150 points)
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