Asked by Owuraku Agyekum on May 09, 2024
Verified
A shortage will occur if a ________ is set ________ the equilibrium price.
A) price floor; below
B) price floor; above
C) price ceiling; above
D) price ceiling; below
Price Ceiling
A cap on prices set by the government, limiting the maximum amount that can be charged for goods or services.
Shortage
A market condition where the demand for a product or service exceeds its supply at a particular price.
- Comprehend the implications of pricing goods above or below equilibrium levels, which lead to surpluses and shortages.
Verified Answer
AF
Alexa FusaroMay 09, 2024
Final Answer :
D
Explanation :
A shortage occurs when a price ceiling (a maximum price) is set below the equilibrium price, limiting how high the price can go. This typically results in demand exceeding supply because the price is artificially kept lower than what the market would naturally set, leading to a shortage of the good or service.
Learning Objectives
- Comprehend the implications of pricing goods above or below equilibrium levels, which lead to surpluses and shortages.