Asked by Carley Lambeth on May 12, 2024
Verified
If the market price of coffee is $3.00 per pound but the government will not allow coffee growers to charge more than $2.00 per pound of coffee, which of the following will happen?
A) Demand must eventually decrease so that the market will come into equilibrium at a price of $2.50.
B) There will be a shortage of coffee.
C) Supply must eventually increase so that the market will come into equilibrium at a price of $2.50.
D) The market will be in equilibrium at a price of $2.00.
Market Price
The present cost at which a service or asset is available for purchase or sale.
Government Allow
Governmental permissions or grants that enable individuals or entities to legally perform activities or exploit resources.
Shortage Of Coffee
A situation where the demand for coffee exceeds its supply, leading to a decrease in available coffee stocks.
- Study the consequences of price constraints, like caps and bases, on market stability.
- Recognize and comprehend nonprice rationing mechanisms within the marketplace.
Verified Answer
TP
Tonya PoseyMay 17, 2024
Final Answer :
B
Explanation :
When the government sets a price ceiling below the market equilibrium price ($2.00 instead of $3.00), it causes a shortage because the quantity demanded exceeds the quantity supplied at that price.
Learning Objectives
- Study the consequences of price constraints, like caps and bases, on market stability.
- Recognize and comprehend nonprice rationing mechanisms within the marketplace.