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SingaporeEconomicsQuick questions
Market Failure and Government Intervention
Quick questions on Price controls (price ceilings and floors) explained: O-Level Economics
3short Q&A pairs drawn directly from our worked dot-point answer. For full context and worked exam questions, read the parent dot-point page.
What is maximum price (price ceiling)?Show answer
A maximum price is used to keep a good affordable, for example rent or basic foods. But at the lower controlled price:
What is minimum price (price floor)?Show answer
A minimum price is used to protect producers (such as guaranteeing farmers an income) or to discourage consumption (such as a high minimum price for alcohol). But at the higher controlled price:
What is the minimum wage as a price floor?Show answer
A minimum wage is a price floor in the labour market. If it is set above the equilibrium wage, the quantity of labour supplied (people wanting jobs) rises while the quantity demanded (jobs offered by firms) falls. The surplus of labour is unemployment. This is why the level of a minimum wage matters so much.
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