Asked by Roselyn Villaruz on Apr 25, 2024
Verified
Suppose a market is in equilibrium.If a price ceiling is set by the government below the equilibrium price,which of the following is most likely to happen?
A) A decline in quantity demanded
B) A surplus
C) A shortage
D) An increase in the quantity being sold
E) A new equilibrium
Price Ceiling
A maximum legal price above which a product cannot be sold; to have an impact, a price ceiling must be set below the equilibrium price.
Equilibrium Price
The price at which the quantity of a good or service demanded equals the quantity supplied, resulting in market balance.
Shortage
A market condition characterized by the demand for a product exceeding its supply, often leading to increased prices.
- Acquire an understanding of market equilibrium and the effects that price ceilings and floors have on the outcomes in the market.
- Realize the impact of official price control measures on the harmony between supply and demand.
Verified Answer
TA
Travis Arlee7 days ago
Final Answer :
C
Explanation :
If a price ceiling is set below the equilibrium price, it means that the maximum price that can be charged for the good is lower than the price that the market would naturally settle at. This creates a situation where the quantity demanded exceeds the quantity supplied, creating a shortage of the good. Consumers are willing to buy more of the good at the lower price, but producers are not willing to supply as much at that lower price. As a result, there will be shortages in the market.
Learning Objectives
- Acquire an understanding of market equilibrium and the effects that price ceilings and floors have on the outcomes in the market.
- Realize the impact of official price control measures on the harmony between supply and demand.