Price Ceilings and Price Floors
Read this section as a review of price floors and price ceilings. Try solving the "Self-Check Questions".
Clear It Up
Do price ceilings and floors change demand or supply?
Neither price ceilings nor price floors cause demand or supply to change. They simply set a price that limits what can be legally charged in the market. Remember, changes in price do not cause demand or supply to change. Price ceilings and price floors can cause a different choice of quantity demanded along a demand curve, but they do not move the demand curve. Price controls can cause a different choice of quantity supplied along a supply curve, but they do not shift the supply curve.