Forum: Discussion 3 — Price Floor or Price Ceiling?
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Forum: Discussion 3 — Price Floor or Price Ceiling?
Free markets generally result in equilibrium prices at the intersection of supply and demand. This is sometimes interrupted by the government. In these cases, the government passes a law or regulation fixing the “price” above or below what would otherwise be the equilibrium price. Imagine that the government mandated that the highest price that can be charged for a movie theater ticket is $25. Would that be a price floor or ceiling at today’s prices? What impact would it have? Why? Next, provide one real-life example of a government imposed price floor or ceiling. How does it work? Do you think the policy is a good one or a poor one?