Macroeconomics › Section C · Demand and supply › Topic C.4
Price ceilings and price floors
Sometimes a government decides a market price is too high or too low and legislates a different one. The demand-supply model predicts exactly what follows: a binding ceiling brings shortage, a binding floor brings surplus - and the side effects show up in places the law never mentioned.
In this topic
- Why governments override prices
- Price ceilings
- Worked example: rent control
- What a shortage does next
- Price floors
- Worked example: a minimum wage
- How big are the real effects?
- Common mistakes to avoid
- Key takeaways
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