Asked by Angela Fuquay on Jun 30, 2024
Verified
Refer to Figure 6-16. A price ceiling set at $70 would create a shortage of 40 units.
Price Ceiling
A regulation that sets the maximum allowable price for a good or service to prevent prices from rising above a certain level.
Shortage
A market condition where the demand for a product exceeds the supply available at a specific price.
- Understand how binding price floors can create surpluses or shortages in markets.
Verified Answer
MB
Miles BridgettJul 06, 2024
Final Answer :
False
Explanation :
A price ceiling set below the equilibrium price causes a shortage by increasing the quantity demanded and decreasing the quantity supplied. However, without specific details from "Figure 6-16," such as the equilibrium price or the quantities involved, it's impossible to confirm the exact size of the shortage created by a price ceiling set at $70.
Learning Objectives
- Understand how binding price floors can create surpluses or shortages in markets.