When the government intervenes in the market by setting a price floor or ceiling, what is the result?
A price ceiling occurs when a price is not permitted to rise above a specified amount. If this maximum price is below the equilibrium price, the quantity demanded by consumers at that price will exceed the amount that producers are willing to supply, and a shortage develops. Since the price method cannot be used to allocate the good or service, other methods must be used. A price floor occurs when a price is not permitted to fall below a specified amount. If this minimum price is above the equilibrium price, the quantity demanded by consumers at that price will fall short of the amount that producers are willing to supply, and a surplus develops. • When the government intervenes in the market with a tariff, what is the result? A tariff is a tax the government places on products imported from another country. The tax raises the cost of importing the product, reducing the supply of the imported product. Because of the supply reduction, the quantity imported goes down and the price goes u
