A price ceiling set below the equilibrium price will result in
A)excess supply.
B)excess demand.
C)the equilibrium price.
D)an increase in supply.
E)a decrease in demand.

Question

Quizplus · Accepted Answer

When the price ceiling is set below the equilibrium price, it means that the maximum legal price is lower than the market-clearing price. This will create excess demand as consumers will be willing to buy more goods/services than suppliers are willing to sell at the capped price. This results in a shortage of goods/services in the market.

A Price Ceiling Set Below the Equilibrium Price Will Result