Introduction to microeconomics - Essay Example

of “Price Ceiling” Price Ceiling is the legal minimum imposed on a particular product traded in the market. Price Ceiling is imposed when government thinks that price charged by sellers of good is too high. Price Ceiling is not binding when it is imposed above the equilibrium level. However the affect of price ceiling can be observed when it is imposed below the equilibrium level. The situation of market changes a lot when this tool of price control is used. The quantity demanded exceeds the quantity supplied.

Because of these changes all buyers of product do not get desired level of product or service. Buyers have to wait in queues and this situation also does not guarantee that whether they will get the product when their number comes. Sellers of a product can also provide the goods and services to their favorite clients which violates the procedure of efficient markets (Ceiling price regulation). Price Ceiling phenomenon reflects that government intervention does not necessarily means that market will operate efficiently and effectively.

Price ceiling is a tool through which government intervenes however it has been observed that intervention is not beneficial in the long run. Economists are of the opinion that output generated through free market economy is the best possible outcome for the welfare of buyers and sellers in the market. Although general public might feel that they are getting goods and services at the lower prices therefore it is better for them but they should also recognize that they are not going to get the product every time they will go to buy it.

Price Ceiling creates severe shortage in the economy therefore it should be noted that government intervention is not the solution to the rising prices or inflation in the long run. Works Cited Ceiling price regulation. Washington [D.C.: Office of Price Stabilization, 19511953. Print.