Participate in a discussion with your classmates regarding price ceilings and pr
ID: 1222977 • Letter: P
Question
Participate in a discussion with your classmates regarding price ceilings and price floors in the market. Review the “EYE on YOUR LIFE” caption titled “Price Ceilings and Price Floors” on page 183 in the textbook. Develop your own policy position, or approach, regarding price floors and price ceilings. Begin this discussion by explaining what a price ceiling and price floor is and then apply this to the following examples:
Price Ceilings: Discuss whether you think we should continue to have a zero price for using a freeway. Or should we have transponders mounted on the dashboards of vehicles, as practiced in Singapore, which monitor and track the miles-driven within a city. Is this technique a non-starter for you? Although, on the bright-side, could you imagine not being stuck in slow-moving traffic again?
Price Floors: Discuss whether you think we should continue to have a Government-regulated minimum wage law. Have you wanted a job, and been willing and available to work, but unable to get hired? Would you have taken a job for a slightly lower wage, if one had been available?
Explanation / Answer
The price control is restrictions on prices by government to maintain affordability of essential product, to combat inflation or to ensure a minimum income for the producers and suppliers of the good. The price controls can be of two types, price floor and price ceiling. The price celling is restricting price below equilibrium price to ensure the affordability of the good. Price floor is restricting price above equilibrium price to ensure minimum income for the producers and suppliers of the good.