<< Chapter < Page Chapter >> Page >
  • Card 9 / 18:
    Does a price ceiling increase or decrease the number of transactions in a market? Why? What about a price floor?

    Assuming that people obey the price ceiling, the market price will be below equilibrium, which means that Qd will be more than Qs. Buyers can only buy what is offered for sale, so the number of transactions will fall to Qs. This is easy to see graphically. By analogous reasoning, with a price floor the market price will be above the equilibrium price, so Qd will be less than Qs. Since the limit on transactions here is demand, the number of transactions will fall to Qd. Note that because both price floors and price ceilings reduce the number of transactions, social surplus is less.

  • Keyboard Shortcuts

    Previous Card ← Previous Card Button
    Next Card → Next Card Button
    Flip Card // Return / Space

Get Jobilize Job Search Mobile App in your pocket Now!

Get it on Google Play Download on the App Store Now




Source:  OpenStax, Principles of economics. OpenStax CNX. Sep 19, 2014 Download for free at http://legacy.cnx.org/content/col11613/1.11
Flash Cards plugin by Curtis Blackwell github.com/curtisblackwell/flash_cards
Google Play and the Google Play logo are trademarks of Google Inc.

Notification Switch

Would you like to follow the 'Principles of economics' conversation and receive update notifications?

Ask