Suppose the equilibrium price in a market is $5, and the government imposes a $4.50 price ceiling. This will:
A)create excess demand.
B)create excess supply.
C)shift the supply curve to the left.
D)have no effect.

Question

Quizplus · Accepted Answer

A price ceiling below the equilibrium price will create excess demand, as quantity demanded will exceed quantity supplied at the new lower price. A price ceiling set below the equilibrium price will cause excess demand, meaning that the quantity demanded will exceed the quantity supplied. Consumers will want to buy more at the lower price, but producers are unable or unwilling to supply the quantity demanded. This can result in shortages, black markets, and inefficiencies in the allocation of goods and resources.

Suppose the Equilibrium Price in a Market Is $5, and the Government