1. Price Ceilings

2.  Occasionally governments will place limits on the price of a good/product or service.  When a top price is established, this is called a price ceiling.  Price ceilings are usually lower than the equilibrium price.

3.  The purpose of establishing a price ceiling is meant to product consumers.  For example, if rents for apartments gets too high, then people wouldn’t be able to afford them.  Price ceilings can cause shortages.

4.  Occasionally, prices are determined to be too low.  The government can impose a minimum prices.

5.  If the price floor is above the equilibrium price, than surpluses can occur.  Again, a price floor is meant to help the consumers.  For example, minimum wage is price floor.