Price ceilings and price floors: an intro

Price ceilings and price floors are confusing. Let’s try and get it clearer.

In real life, a ceiling is the highest point. You can’t go higher than a ceiling. (Sometimes the ceiling is the roof). 

A floor? This is the lowest point. You can’t go lower than the floor. 

Let’s add a layer of complexity.

The ceiling means you can’t go any higher. Therefore this is the maximum point. So, in Economics, a price ceiling means it’s the highest possible price in the market. You can’t go any higher!

The floor means you can’t go any lower. Therefore this is the minimum point. So, in Economics, a price floor means it’s the lowest possible price in the market. You can’t go any lower!

When I draw price floors and price ceilings, I use a small stick figure person to help me get it right. Check out my drawings below (price ceiling and then price floor).

Price ceiling (so the price is the MAXIMUM price).

Price floor (so the price is the MINIMUM price).

You can also check out the video below for more.