Asked by Laura Resendez on May 12, 2024
Verified
Refer to Figure 4.3. If the government will not allow retailers to charge more than $0.40 for a pencil, which of the following will happen?
A) Demand must eventually decrease so that the market will come into equilibrium at a price of $0.40.
B) Supply must eventually increase so that the market will come into equilibrium at a price of $0.40.
C) A nonprice rationing system such as queuing must be used to ration the available supply of pencils.
D) The market will be in equilibrium at a price of $0.40.
Nonprice Rationing
Methods of distributing goods or services using criteria other than price, such as queues or rationing cards.
Price Ceiling
A government-imposed limit on how high a price is charged for a product, aimed at protecting consumers from rapid price increases.
Queuing
Waiting in line as a means of distributing goods and services: a nonprice rationing mechanism.
- Explore the influence of an overabundance of supply and demand within the market framework.
- Recognize the role of nonprice rationing systems in addressing excess demand.
Verified Answer
AO
Ajoke OmageMay 12, 2024
Final Answer :
C
Explanation :
When a price ceiling (a maximum price set by the government) is imposed below the equilibrium price, it typically results in a shortage because the quantity demanded exceeds the quantity supplied at that price. Nonprice rationing mechanisms, such as queuing, are often needed to distribute the limited supply.
Learning Objectives
- Explore the influence of an overabundance of supply and demand within the market framework.
- Recognize the role of nonprice rationing systems in addressing excess demand.