When government imposes a price ceiling or a price floor on a market,

Question

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When a price ceiling or a price floor is imposed, the market is no longer able to use price as a rationing device. Instead, other methods such as queuing or waiting lists may be used to allocate goods and services. This can result in inefficiencies and unintended consequences such as black markets or reduced quality. Buyers may benefit from lower prices under a price ceiling, but sellers may suffer from reduced profits or incentives to produce. Similarly, a price floor may benefit sellers by ensuring higher prices, but buyers may face increased costs. Overall, however, the distortion of price signals can lead to imbalances in supply and demand, creating shortages or surpluses in the market.

When Government Imposes a Price Ceiling or a Price Floor