If the market price of coffee is $3.00 per pound but the government will not allow coffee growers to charge more than $2.00 per pound of coffee, which of the following will happen?
A) Demand must eventually decrease so that the market will come into equilibrium at a price of $2.50.
B) There will be a shortage of coffee.
C) Supply must eventually increase so that the market will come into equilibrium at a price of $2.50.
D) The market will be in equilibrium at a price of $2.00.

Question

Quizplus · Accepted Answer

When the government sets a price ceiling below the market equilibrium price ($2.00 instead of $3.00), it causes a shortage because the quantity demanded exceeds the quantity supplied at that price.

If the Market Price of Coffee Is $3