Asked by Colby Nuccio on Jul 18, 2024
Verified
Shortages are associated with price _______;surpluses are associated with price _______.
A) floors;ceilings
B) ceilings;floors
C) equilibrium;equilibrium
D) None of these choices are correct.
Price Floors
are government-imposed limits on how low a price can be charged for a product, with the aim to ensure fair compensation for producers.
Price Ceilings
Price Ceilings are government-imposed limits on how high a price can be charged for a product, service, or commodity, often implemented to protect consumers from excessively high costs but can lead to shortages.
- Acquire understanding on the notion of shortages and surpluses along with their origins.
Verified Answer
NR
Noemi ReyesJul 21, 2024
Final Answer :
B
Explanation :
Shortages occur when the quantity demanded is greater than the quantity supplied, which creates upward pressure on prices. A price ceiling, which is a government-imposed limit on how high prices can rise, can create a shortage by preventing prices from reaching their market equilibrium level. Surpluses occur when the quantity supplied is greater than the quantity demanded, which creates downward pressure on prices. A price floor, which is a government-imposed minimum price for a product, can create a surplus by preventing prices from falling to their market equilibrium level. Therefore, shortages are associated with price ceilings (which create a maximum price limit) and surpluses are associated with price floors (which create a minimum price limit).
Learning Objectives
- Acquire understanding on the notion of shortages and surpluses along with their origins.