Government Interventions in Supply and Demand

Sometimes governments step in to regulate markets.

• Price Ceiling: Maximum price limit (e.g., rent control). Prevents prices from going too high but may cause shortages.
• Price Floor: Minimum price limit (e.g., minimum wage, agricultural price support). Prevents prices from going too low but may cause surplus.

Example:
If the government sets a price ceiling on wheat to make food affordable, it may discourage farmers from producing more, causing shortages.