Price Ceiling occurs when the government puts a legal limit on how high the price of a product can be. Price Ceiling is only effective if it is set below equilibrium.
* Creates a shortage*
Ex: Rent Control
Price Floor is the lowest legal price a commodity can be sold at. They are used by the government to prevent prices from being too low.
*Creates a surplus*
Ex: Minimum Wage
Equilibrium is the point at which the supply curve and the demand curve intersect. All resources are being used at this point.
Excess Demand occurs when the quantity demanded is greater than the quantity supplied.
*Creates a shortage*
Excess Supply Occurs when the quantity supplied is greater than the quantity demanded.
*Creates Surplus*
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