Read the following statements carefully.
Statement 1: Price ceiling is for benefit of consumers and price floor is for the benefit of sellers.
Statement 2: Price ceiling and floor are set for essential commodities.
Answer & explanation
Correct answer: option 3
The correct answer is option 3: Statement 1 is true and Statement 2 is false.
Statement 1: True
- Price Ceiling: A maximum limit set by the government on the price of essential goods (e.g., food, rent, medicines) to protect consumers from high prices.
- Price Floor: A minimum limit set by the government to ensure producers/sellers get a fair price (e.g., minimum wages, support price for farmers).
- Since price ceilings benefit consumers and price floors benefit sellers, this statement is correct.
Statement 2: False
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Price ceilings are typically applied to essential commodities (like food, medicines).
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Price floors are often used for agricultural products to support farmers' incomes, but they can also be applied to labor (minimum wage) or other sectors.
- Statement 2 is false because price floors are not limited solely to essential commodities.