Final answer:
Price ceilings prevent a price from rising above a set level, often to make essentials like housing more affordable, while price floors stop a price from falling below a set level, as seen in minimum wage laws to ensure workers receive a living wage. Both aim to control prices but have potential side effects like shortages or unemployment.
Step-by-step explanation:
Price ceilings and price floors are two types of price controls that governments may enact to regulate the costs of goods and services. A price ceiling is a legal limit on how high a price for a product can go, which prevents that price from rising above the set ceiling. This measure is often applied to commodities considered essential to ensure they remain affordable for a majority of people. For instance, governments may impose a price ceiling on the housing rental market to keep the rent at an affordable level.
In contrast, a price floor sets a lower limit on the price of a commodity or service and is designed to prevent the market price from falling below that level. An example of this is the minimum wage in the labor market, which sets the lowest price for labor that employers can legally pay their employees. The aim here is to ensure workers can earn a living wage that covers their basic costs of living.
While both mechanisms aim to control prices in different ways, they also can have unintended side effects, such as shortages when a ceiling is set too low, or unemployment when a floor is set too high.