When the government controls the price of a product, causing the market price to be below the free market equilibrium price,
A) some consumers gain from the price controls and other consumers lose.
B) all producers gain from the price controls.
C) both producers and consumers gain.
D) all consumers are better off.

Question

Quizplus · Accepted Answer

When the government controls the price of a product, causing the market price to be below the free market equilibrium price, some consumers may benefit from the lower price, while others lose out because they are not able to purchase the limited supply available at the controlled price. Additionally, producers may suffer as they are not receiving a fair market price for their goods. Therefore, choice A is the best answer as it acknowledges that some consumers will gain and others will lose from the price controls.

When the Government Controls the Price of a Product, Causing