Price Floor and Price Ceiling - Economy UPSC notes

Price Floor  and  Price Ceiling 🏷️ 1. Price Floor (Minimum Price) ✅ Meaning: A price floor is the lowest legal price that can be charged for a good or service. It is set above the equilibrium price to help producers earn more. 🥛 Example: Milk Price Support Suppose the equilibrium price of milk is ₹20/litre. The government says farmers must get at least ₹25/litre . So, the price floor is ₹25 . 🔻 What happens? At ₹25, more milk is produced (farmers are happy). But fewer people buy it (it's costlier). So there’s extra unsold milk → called surplus . 🎯 Price floors help producers , but can lead to excess supply . 🔖 2. Price Ceiling (Maximum Price) ✅ Meaning: A price ceiling is the highest legal price that can be charged. It is set below the equilibrium price to help consumers buy cheaper. 🏠 Example: Rent Control Suppose rent for a flat is ₹10,000/month. The government says landlords can charge max ₹7,000/month . So, the price ceiling is ₹7,000 . 🔺 What happens? At ₹7,000, more people want houses . But landlord…