Questions and Answers
What's the definition of price ceiling?
A price ceiling is a government-imposed limit on the price charged for a product to protect consumers.
Who might benefit a great deal?
Those operating in the black market.
Will a shortage occur with a price ceiling situation?
True
Does a price ceiling work effectively?
Signup and view all the answers
Does the black market occur in a price ceiling situation?
Signup and view all the answers
Study Notes
Price Ceiling
- A price ceiling is a government-imposed limit on the price charged for a product.
- Intended to protect consumers from prices of essential commodities becoming unaffordable.
- Prolonged price ceilings without controlled rationing can lead to problems such as shortages.
- Misuse can occur when a government misdiagnoses high prices instead of addressing low supply.
- Exists only in regulated markets; absent in a free market economy.
Black Market
- Black markets may thrive when price ceilings create shortages.
- Individuals unable to obtain necessary goods may resort to purchasing from black markets.
- Those fortunate enough to acquire scarce goods can profit by selling them at illegal, inflated prices.
- The black market price is higher due to limited supply compared to a free market where more sellers are present.
- Consumers may have no choice but to purchase items at higher black market prices during shortages.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
Explore the concept of price ceilings through these flashcards. Understand how they are imposed by governments to protect consumers, and the potential issues that may arise from long-term enforcement. Gain insights into their impact on supply and market conditions.
