Thursday, February 9, 2017

The price ceiling which is the highest the price can be is lower than the price equilibrium, so when the price is $5, you see the supply is 10 and the demand is 30. This means there is a higher demand than what is in supply, therefore there is a shortage of 20.
The price floor is the lowest the price can be and since it's still $5, the supply and demand is the same as in the first part. But since the price floor can be increased, there is no surplus or shortage, it can be moved to create equilibrium or surplus. Basically it isn't fixed, whereas with the price ceiling at $5, there is no way to rectify the situation of the shortage.

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