Floor And Ceiling Revenue

Price ceiling as well as price floor are both intended to protect certain groups and these protection is only possible at the price of others.

Floor and ceiling revenue.

Price ceilings impose a maximum price on certain goods and services. They are usually put in place to protect vulnerable buyers or in industries where there are few suppliers. The domestic demand function is given by q 10 2 x p the domestic supply function is q 2 x p 2. A good example of this is the oil industry where buyers can be victimized by price manipulation.

The graph below illustrates how price floors work. The limits have been based on artc forecasted expenditures for 2008 09 as submitted to the accc as part of artc s application. Price ceiling maximum price the highest possible price that producers are allowed to charge consumers for the good service produced provided set by the government. Governments will usually impose price ceilings when they believe that the equilibrium price in the market is too high and undesirable e g.

Understanding the different methods businesses use to set budget ceilings will help you maintain flexibility in your spending without going into unmanageable. Price floor is typically proposed to ensure good income of people involved in farming agriculture and low skilled jobs. Start studying unit 4 elasticity price floors and price ceilings. A suppose there is a price ceiling of 2 sar.

2008 09 floor and ceiling revenue limits provided should be considered as indicative only. Floor and ceiling revenue limits are defined in detail in the access undertaking. Learn vocabulary terms and more with flashcards games and other study tools. Ceiling refers to the highest price the maximum interest rate or the largest of some other factor involved in a transaction.

It must be set below the equilibrium price to have any effect.