The government enforces price floors and price ceilings on different kinds of markets for the benefit of society. A price floor is a minimum price that the government sets so that the price can’t go below that legal level because the market equilibrium is regarded as being too little. A price ceiling is a maximum price that the government sets so that the good being sold or service cannot be sold for more because the market equilibrium is regarded as being too high. The government uses price floors to avoid prices from being too little. The government uses it when it is thought that the equilibrium price is too low for society to hold up. One of the very common and a good example of a price floor or minimum price is the minimum wage, which is the minimum amount that can be payed for work/labor. So it is the price of doing labor. The government puts a minimum wage so making it illegal for an employer to pay an employee less than a certain …show more content…
The government uses it when it is thought that the equilibrium price is too much for the majority of society to afford. The price ceiling is therefore usually put below the equilibrium so that more people can afford the service or good. An example is to put a price ceiling on sports or concert tickets. The government might put a maximum price on sports tickets so that all fans have the possibility to afford and buy the tickets. When putting a maximum price on sports tickets for example it results in a shortage of sports tickets. So the demand for sports tickets increases and more people are willing to buy sports tickets then there are available. Demand will therefore be bigger then supply. The price of the sports tickets decreases when setting a price ceiling so that more people are willing to buy tickets then is available. The supply of tickets will always stay the same but the demand will