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  • Kazi Ya Bibi

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    The document discusses price floors and price ceilings and how they impact supply and demand. It defines a price floor as a minimum price set by the government and a price ceiling as a maximum price. It states that a price floor can lead to surplus production and decreased output, resulting in unemployment. A price ceiling can cause shortages of goods in the market, limited availability, and inefficiency as suppliers face losses from selling below costs. Both mechanisms disrupt market supply and demand.

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    Economics

    Original Title

    KAZI YA BIBI

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    The document discusses price floors and price ceilings and how they impact supply and demand. It defines a price floor as a minimum price set by the government and a price ceiling as a maximum price. It states that a price floor can lead to surplus production and decreased output, resulting in unemployment. A price ceiling can cause shortages of goods in the market, limited availability, and inefficiency as suppliers face losses from selling below costs. Both mechanisms disrupt market supply and demand.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    6 views2 pages

    Kazi Ya Bibi

    Uploaded by

    melimeliisack
    The document discusses price floors and price ceilings and how they impact supply and demand. It defines a price floor as a minimum price set by the government and a price ceiling as a maximum price. It states that a price floor can lead to surplus production and decreased output, resulting in unemployment. A price ceiling can cause shortages of goods in the market, limited availability, and inefficiency as suppliers face losses from selling below costs. Both mechanisms disrupt market supply and demand.

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    © All Rights Reserved
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    of 2

    CODE:AEA 101.

    AGRICULTURAL ACONOMICS AND DEVELOPMENT.

    GROUP NUMBER 02.

    ASSIGNMENT:

    1.What is price floor and price ceiling?

    2.How price floor and price ceiling influence the supply and demands of goods and services in the
    market ?

    ANSWERS

    PRICE FLOOR

    •Is the government imposed price control/limit on how low price is charged for a product (labours,
    wages and price).

    PRICE CEILLING

    •Is the government imposed price control/limit on how high price is charged for a product (labours,
    wages and price)

    PRICE FLOOR AND PRICE INFLUENCE SUPPLY AND DEMAND OF GOOS AND SERVICES IN MARKET AS
    FOLLOW:-

    PRICE FLOOR

    ~When the price floor occurred, there is increase of suplus production which lead to the decrease of
    production from the producer like farmers and industries.

    ~The decrease in production results to unemployment and low output.This will discourage the innovation
    and efficiency improvement.

    PRICE CEILLING

    ~When the price ceilling occurred, there is shortage of products in the market,hance no suplus.This result
    to limited availability of goods and services in the market.

    ~Limitation of goods and services availability leads to inefficiency and dissatisfaction of customers.

    ~Also this price ceilling lead to increase of loss, because the capital used is greater than the revenue
    obtained after selling in the market.This discourage suppliers from supplying goods in the market and
    decrease investment in the industries.

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