What is the effect of a price ceiling implemented below equilibrium price?SurplusNo EffectNone of the these answersShortage

Answered: What is the effect of a price ceiling…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter3: Demand And Supply

Section: Chapter Questions

Problem 7SCQ: What is the effect of a price ceiling on the quantity demanded of the product? What is the effect of...

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What is the effect of a price ceiling implemented below equilibrium price?
Surplus
No Effect
None of the these answers
Shortage

Expert Solution

Step 1

A price ceiling is the maximum price that a supplier can charge. At the same time, an equilibrium price is a price that producers are willing to accept and consumers are willing to pay. If the equilibrium price is above the price ceiling, it shows that the suppliers are not getting what they can get. This leads to a fall in the supply in the economy and a rise in demand. Thus, there will be a shortage in an economy due to lower supply and higher demand.

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