Price Floor and Ceiling

Price Floor and Ceiling

http://www.college-cram.com/study/economics/government-intervention/price-ceiling/

http://market.subwiki.org/wiki/Price_floor

 

As we learned that there is no equilibrium perfectly in our free market or capitalistic economy. Between demand and supply effect how consumer can purchased their goods with right price. Supplier wants make more profit as much they can; also the consumer wants pay less money as much they can.

There is two price ceiling by government that bounding and non-bounding. Bounding line is below equilibrium line that minimize price. Un-bounding line is above the equilibrium. It is depend on demand and supply.

I believe that the price method is not always work between demand and supply. For example, there is over supplier and the supply price down also, the demand is high then the price will be decrease. But sometimes, the price increase then decrease. The Government will intervene to control price to increase to high price this kind of unexpected increase. Black market will be not applied. The government will cannot control Black market because some supply items does not fulfill to demanders requirement. I believe that most black market items are high quality goods item or imports. For example, liquor, cigarette, band named items. These items supplier can make enough but demand increased any times.

However, if the price low, many of consumer can purchase whatever they wants. The other hand, how explained that some goods are very high price but still many consumers demand? What would be the price line has to drawing this demand/supply line?

Market price does not always the same result from economist theory because many of side effects/resources are changed every day. For example of material, labor, exchange rate and etc. are changed.  

However, price ceiling definition is a government-imposed maximum price charged on a product. It differs from a price floor that a price ceiling artificially keeps prices from rising too high, which in theory allows consumers to afford the product or service, but can result in shortages and rationing. A price floor keeps prices from falling too low, which can protect producers, but can generate excess supply and waste

In conclusion from price floor and price ceiling is protecting both supplier and demander that some economic is negative falling situation. This will be effect shortage.