dollar, money, president of the u s a @ Pixabay

Every economic theory has its own paradox.

Even the most standard of theories, like supply and demand, have a paradox which is well-known to economists: the price ceiling.

A price ceiling is an artificial limit that prevents a seller from selling their good or service for more than it’s worth in order to maintain profitability.

The problem with this is that when you set a maximum amount someone can charge for something, you will inevitably get less people willing to buy.

Because they don’t want to pay more than what they think it’s worth.

In other words, by limiting how much sellers are allowed to sell goods or services at any given time.

We limit how many consumers will purchase them as well – even if those prices are still profitable!

This is an example of supply and demand.

money, finance, business @ Pixabay

One seller, Susan, has a great product that she wants to sell for $20.

However, because there’s no price ceiling set in place by law or under the company rules.

Someone else might buy her products at a lower cost instead .

Due to competition from other sellers who want their goods purchased.

As well but are willing to reduce pricing more.

In order to get it done quicker than those with higher prices.

If there was also another seller who had the same good/service selling for only $17 per unit.

Then buyers would gravitate towards purchasing these items instead.


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