Reference no: EM132943757

Question - A price floors and a price ceilings are defined by their functions. The purpose of a price ceiling is to keep the price from rising to the equilibrium, thus a price ceiling, a legal maximum price, must be below equilibrium to be effective since that will keep the price below the equilibrium. A price floor's function is to keep the price from falling to the equilibrium, it is a legal minimum price. To be effective it must be above equilibrium price. A price ceiling generates a shortage and a price floor generates a surplus. In your opinion, as a general policy should governments be using these to manipulate the market, why?