Essay about How Ceiling Price Influence Economy

1922 Words Nov 16th, 2016 8 Pages
How ceiling price influence economy Price control is a big thing in our daily life, and it affects everyone. From the necessary products to the luxury product, everything can have price control. Normally, the market can control by itself, as a certain demand can match a certain supply to let the product have a biggest profit and let the consumer benefit because the consumer surplus is maximum. However, the market price may be too low or too high, the government will have to show up control prices, such as the floor price and ceiling price. And sometimes the price control may work and have a benefit for the product market when the government use it in a right way, but sometimes it may also causes the opposite effect in the market even causes losses in efficiency. As the government gets involved in the market, the market will experience deadweight loss, if the government enacls a price ceiling, the market may experience shortages. And if the government set a price floor, the market may experience surplus. For this reason, when the government tries to use the price control in the market, they have to consider the influence for both sides. Most of times, market can control by itself to have an equilibrium point for the demand and supply quantity in a specific price. When the market control by itself, it may cause a false phenomenon, like the 2008 financial crisis. As the bank had a low requirement for the divide payment rule and giving the loan, it showed a false good market…

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