Under what circumstances are price floors and ceilings (price controls) useful to governments.?

Question

At least 3 would do

Answer 1

Price floors and ceilings are generally more useful to the governments than consumers.  I'm not too sure about price floors however- esp minimum wage.  Some say that it would increase supply of workers but reduce demand and therefore cause unemployment.  Yet others say that will not happen.

So its controversial.  Ceilings usually make prices lower than the market equilibrium.  That causes too much demand and low supply.

But as I mentioned before, ceilings and floors can be beneficial to govt under the following conditions (and I totally agree with the first answerer).

1. If the ceiling is under market equilibrium.

2. If the floor is above market equilibrium.

The govt would benefit from these greatly.  It would make them look good, esp price ceilings.  Price ceilings make it look like they are trying to reduce the prices that "greedy landlords" (some may be greedy but not all are) set (market equilibr.).  As for floor above equilibrium, that would make them look good if its something as minimum wage.  There is much support for the min. wage.  As for whether min. wages work I dunno, I have to look, research into it more.

Just my thoughts. I can't think of third way that floor/celing would actually work. ^^;

Answer 2

If price floors are set above equilibrium then they are effective but if below then they are useless.

If price ceilings are set below equilibrium then they are effective but if above then they are useless.