Governments intervene in markets when they inefficiently allocate resources.
A price ceiling is a price control that limits how high a price can be charged for a good or service.
A binding price ceiling will create a surplus of supply and will lead to a decrease in economic surplus.
A binding price floor is a price control that limits how low a price can be charged for a product or service.
Binding price floors typically cause excess supply and decreased total economic surplus.
Deadweight loss is the decrease in economic efficiency that occurs when a good or service is not priced at its pareto optimal level.
Many argue that price controls ensure resource availability, but most economists agree that these controls should be used sparingly.
Governments use its tax systems to raise funds for its programs and influence its citizens' economic actions.
Tax incidence falls mostly upon the group that responds least to price, or has the most inelastic price-quantity curve.