Diagrammatical explain simple application of tools of demand and supply curve

Solution :-
Simple application of tools of demand and supply curve are :-
1)Price Ceiling and Price Floor

Basis of Difference

Price Ceiling

Price Floor


Maximum level of price that a seller can charge.

Minimum level of price that a seller should charge.

Basic Rationale

To protect the welfare of poor and vulnerable people of the society.

To protect the welfare of labourers and farmers by ensuring minimum returns.


Maximum Price is set below the equilibrium price.

Minimum Price is set above the equilibrium price.


Leads to excess demand.

Leads to excess supply.

The following are the Consequences of Price Ceiling:-

1) Excess demand − Due to artificially imposed price, cutting lower than the equilibrium price leads to the emergence of the problem of excess demand.

2) Fixed Quota − Each consumer gets a fixed quantity of good (as per the quota). The quantity often falls short of meeting the individual’s requirements. This further leads to the problem of shortage and the consumer remains unsatisfied.

3) Inferior goods − Often it has been found that the goods that are rationed are usually inferior goods and are adulterated.

4) Black marketing − The needs of a consumer remains unfulfilled as per the quota laid by the government. Consequently, some of the unsatisfied consumers get ready to pay higher price for the additional quantity. This leads to black-marketing and artificial shortage in the market.

The Complete Topic and Diagram of Price Ceiling and Price Floor, ​has been extensively covered in the study material that is available on our site. You can follow the below link to go through the concept:-

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