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Why is the price floor above the equilibrium point and the price ceiling below the equilibrium point? Please explain as well!

User TomNg
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Answer:

THE GIVEN STATEMENT IS WRONG.

The prices and the quantities of the products are usually set up by considering demand and supply. Sometimes, people may not agree with the price of a certain thing. Due to these reason, the government may set a maximum and minimum price limits on a product so it always remains in a certain range.

The upper limit is Price Ceiling. When a Price Ceiling is set below the equilibrium point, the demand will exceed the supply and shortages will occur.

The lower limit is Price Floor. When a price floor is set above the equilibrium point, the supply will exceed the demand, resulting in surplus quantity of a product

User Landi
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