Either a price floor or a price ceiling will result in a smaller quantity exchanged than if the price was at its equilibrium level.

Question

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A price floor is a minimum price set by the government above the equilibrium price, and a price ceiling is a maximum price set by the government below the equilibrium price. In both cases, they create a distortion in the market that leads to a smaller quantity of goods or services being exchanged than the equilibrium level. This is because the price either becomes too high (price floor) or too low (price ceiling) for producers or consumers to meet the demand.

Either a Price Floor or a Price Ceiling Will Result