Economics: Unit 4 Topic 4- Price Controls

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5 Terms

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price controls

Legal restrictions on how high or low a market price may go.

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Price Ceiling

A legal maximum on the price at which a good can be sold. Price Ceiling is ALWAYS SET BELOW the equilibrium price.

<p>A legal maximum on the price at which a good can be sold. Price Ceiling is ALWAYS SET BELOW the equilibrium price.</p>
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Price Floor

A legal minimum on the price at which a good can be sold. A Price Flow is ALWAYS SET ABOVE the equilibrium price.

<p>A legal minimum on the price at which a good can be sold. A Price Flow is ALWAYS SET ABOVE the equilibrium price.</p>
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Surplus

A situation in which quantity supplied is greater than quantity demanded. A surplus will ALWAYS be created when a PRICE FLOOR is set.

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Shortage

A situation in which quantity demanded is greater than quantity supplied. A shortage will ALWAYS be created when a PRICE CEILING is set.

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