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"Price Ceilings and Floors" icon

Price Ceilings and Floors

Legislators often have been dissatisfied with the outcomes of free markets. The invisible hand is not good enough for them, so they mandate prices that are lower or higher than the equilibrium price. A price ceiling is a legal maximum price that may becharged for a good or service. If a price ceiling is below the equilibrium price, it will cause shortages and illegal, or underground markets to develop. A price floor...

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