Sunday, 6 May 2018

What happens when you remove a price ceiling in a market?

The
answer to this depends on the situation. Historically, price ceilings are established when
prices have become very high due to extenuating circumstances, like rapid inflation. If there is
a very high demand for a good, establishing a price ceiling could limit supply, because the
profits that producers can get for providing the good or service would be limited. In this
situation, removing a price ceiling would incentivize producers to put more of the good or
service on the market. On the other hand, if there is a very high demand for the good or
service, it could lead to prices rising dramatically.

One example of this
phenomenon is housing in urban areas. It is in very high demandso much so that producers can
charge very high rents that are not affordable for anyone but very affluent people. In some
places, price ceilings have been established to check the phenomenon of
"gentrification," where many longtime residents are driven out of neighborhoods by
changes in demand. In this...

href="https://www.investopedia.com/terms/p/price-ceiling.asp">https://www.investopedia.com/terms/p/price-ceiling.asp

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