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Pricing, quantity, and welfare effects of a binding price ceiling. There is a substantial body of research showing that under some circumstances price ceilings can, paradoxically, lead to higher prices. The leading explanation is that price ceilings serve to coordinate collusion among suppliers who would otherwise compete on price.
An ineffective, non-binding price floor, below equilibrium price. A price floor could be set below the free-market equilibrium price. In the first graph at right, the dashed green line represents a price floor set below the free-market price. In this case, the floor has no practical effect.
[78]: 1 [89]: 4 [88]: 1 Writing in 1946, economists Milton Friedman and George J. Stigler said: "Rent ceilings, therefore, cause haphazard and arbitrary allocation of space, inefficient use of space, retardation of new construction and indefinite continuance of rent ceilings, or subsidization of new construction and a future depression in ...
A related government intervention to price floor, which is also a price control, is the price ceiling; it sets the maximum price that can legally be charged for a good or service, with a common example being rent control. A price ceiling is a price control, or limit, on how high a price is charged for a product, commodity, or service.
Non-optimal production can be caused by monopoly pricing in the case of artificial scarcity, a positive or negative externality, a tax or subsidy, or a binding price ceiling or price floor such as a minimum wage.
Resale price maintenance (RPM) or, occasionally, retail price maintenance is the practice whereby a manufacturer and its distributors agree that the distributors will sell the manufacturer's product at certain prices (resale price maintenance), at or above a price floor (minimum resale price maintenance) or at or below a price ceiling (maximum resale price maintenance).
In economics, a price support may be either a subsidy, a production quota, or a price floor, each with the intended effect of keeping the market price of a good higher than the competitive equilibrium level. In the case of a price control, a price support is the minimum legal price a seller may charge, typically placed above equilibrium.
Price ceilings: Laws limit the maximum price that can be charged for given goods. Washington state does not have a specific statute addressing price gouging, can nevertheless have sought to apply its consumer protection act to argue that high prices during COVID-19 for PPE was an "unfair" or "deceptive" practice. [6]