Can you think of any examples from real life when a price floor or ceiling is set to maintain competitive markets?
- In the agricultural industry, the government may set a price floor on certain crops to ensure that farmers receive a minimum income for their harvests. This helps to maintain a competitive market by preventing prices from dropping too low due to oversupply.
- Rent control laws in some cities set a price ceiling on how much landlords can charge tenants for rent. This is done to prevent landlords from overcharging and artificially inflating prices in the housing market, thus ensuring more affordability and competition among rental properties.
- Minimum wage laws set a price floor on how much employers must pay their employees. This helps to ensure that workers are paid a fair wage and prevents employers from exploiting labor by paying extremely low wages, which can lead to a more competitive job market.