• Entry
  • Reader's guide
  • Entries A-Z
  • Subject index

Price Controls

Price controls are said to exist whenever government mandates a maximum price (“price ceiling”) above which a good or service cannot legally be sold or a minimum price (“price floor”) below which a good or service cannot legally be sold.

Price ceilings attempt to lower the cost to the consumer of acquiring the price-ceilinged product, whereas a price floor attempts to increase the return received by sellers of the product in question. Both schemes achieve outcomes opposite of their objectives.

In markets without price controls, prices are determined by the interaction of the voluntary purchase and use decisions of buyers (“demand”) with the voluntary production and sales decisions of sellers (“supply”). If, for whatever reason, buyers demand a product more intensely than had previously been the case—meaning ...

    • Loading...
    locked icon

    Sign in to access this content

    Get a 30 day FREE TRIAL

    • Watch videos from a variety of sources bringing classroom topics to life
    • Read modern, diverse business cases
    • Explore hundreds of books and reference titles