ECON 1B03 Study Guide - Quiz Guide: Price Floor, Price Ceiling, Economic Equilibrium
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ECON 1B03 Full Course Notes
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Quiz submissions - bonus quiz 2 for test 2 due monday march. Written: feb 28, 2014 4:54 pm - feb 28, 2014 5:01 pm. Price controls are used to make markets more efficient. Price controls are a tool used by business firms to fix prices. Price controls are nearly always effective in eliminating shortages. Price controls are used by governments to reallocate resources more equitably. When will a price ceiling be binding? only if it is set equal to equilibrium price only if it is set above equilibrium price only if it is set below equilibrium price. A price ceiling is never binding in a free market system. Policymakers have studied the effects of the price floor carefully and recognize that the price floor is advantageous for society as a whole. Buyers and sellers of corn have agreed that the price floor is good for both of them and have therefore pressured policymakers into enacting the price floor.
