What to explore
Change parameters and watch the model adjust.
- Demand and supply intercepts and slopes
- Policy type and the controlled price level
Intermediate price theory
Price Ceilings and Price Floors
A competitive-market model for binding and non-binding price controls, including shortages, surpluses, and welfare effects.
Focus
Binding vs non-binding controls and market imbalance
Switch between ceilings and floors to see when the policy binds, how traded quantity changes, and where welfare losses come from.Core ideas
Interpret the mechanics before you chase the graphs.
- A binding price ceiling creates a shortage because quantity supplied becomes the short side of the market.
- A binding price floor creates a surplus because quantity demanded becomes the short side of the market.
- Even if the posted price changes, the number of trades can fall below the competitive benchmark.
Learning goals
What this model should help students internalize.
- Distinguish between binding and non-binding price controls.
- Compute shortages or surpluses under a ceiling or floor.
- Compare competitive and controlled welfare outcomes.
Prerequisites
Concepts to review before diving in.
- Competitive equilibrium
- Basic consumer and producer surplus ideas
Next models to study
Keep moving through the track.
Intermediate price theory
Elasticity and Tax Incidence
Compare how buyer and seller tax shares move as demand or supply becomes more or less elastic.
Advanced microeconomics
Consumer Choice and Indifference Curves
Adjust tastes, prices, and income to compare interior and corner solutions, then track how optimal bundles and indirect utility move.