What is the price ceiling?

Price ceilings are the limits of the amount that can be charged for a specific product or service. In many cases, the price ceiling is deposited by the government in an effort to correct a problem with the general economy and at the same time protect the interests of consumers in general. However, it is not uncommon for some industries to store the price ceiling as a means to support further development of this industry. The use of this second application often has much in common with the relationship between supply and the product for the product.

When a prices ceiling is a character set by a government, a product or service that is considered necessary, is usually involved. For example, the government may set a limit to an amount that energy companies can charge to customers for each unit consumed. The intention is to protect consumers' interests by preventing suppliers from charging or fees that are likely to prevent consumers from allowing to allow the Germans to be considered necessary for a fair standard of living. In the United States is not for regulatoryState level agencies unusual to monitor and store price ceilings at the expense of public services.

Storage of the price ceiling can help stabilize a specific market and also have a beneficial impact on the economy in general. This strategy often encourages suppliers who charged exaggerated rates for their products to either limit production or maybe left the market completely. This leaves suppliers who are able to offer acceptable quality products at a price that consumers can afford. At the same time, the ability to purchase products at reasonable prices will make the consumer to do so. They also have more resources that they spend on other purchases, which in turn increases demand in several markets and results in an economy stimulation.

There also sometimes existence how low the price can be charged for the good or service that is considered a necessity. Although this number is often referred to as a price floor, sometimesis called the ceiling of low price. As with the higher prices limit, this limit of lower prices is prevented from preventing the creation of a monopoly within the sector, which would undermine the ability of some companies to be competitive. The inability to observe price floors and ceilings may ultimately have a limitation of consumers' capabilities, the state of things that are not in the best interest of consumers or in the general economy of the area where it is located.