Price Ceilings (maximum price)

1. Definition (use text book)

2. Reason to set the ceiling
3. Examples
4. Diagram
5.

Impacts
Shortages
Difficulties in rationing
Inefficient allocation of resources and welfare loss
Black markets
More affordable consumers

6.

Impacts on stakeholders (use text book)

Government
Consumers
Producers
Workers in the industry
Suppliers to the industry

Number question
Qd = 12,000 2000p
Qs = 0 + 2000p
Price ceiling = $2
7.
a)
b)
c)
d)
e)

Calculate (before and after the ceiling is imposed)

Price
Quantity bought and sold
Producer revenue
Consumer expenditure
Shortage

8. What would be the impact if the ceiling was set at $6?

9. Examine whether Jakarta City Government should impose a
price ceiling on.. (15 marks)

Price Floor (minimum price)

1. Definition (text book)
2.

Reasons to set a price floor

Support producers (E.g. farmers)
Discourage consumption (E.g. alcohol)
Protect workers (minimum wage)

3. Diagram
4.

Impacts
Surplus
Inefficient allocation of resources welfare loss
Govt usually buys the surplus, but does it dump, destroy, or
store?

5.

Impact on stakeholders (use text book)

Government
Producers
Consumers
Workers in the industry
Suppliers to the industry

Number question
Qd = 1,500 150p
Qs = 0 + 150p
Floor is set at $8
6.
a)
b)
c)
d)
e)
f)

Calculate (before and after the floor is set)

Price
Quantity bought and sold
Surplus
Producer revenue
Consumer expenditure
Govt. expenditure

7. What would happen if the floor was set at $3?

8. Examine whether Jakarta should have increased the minimum
wage? (15 marks)