A maximum price below the market equilibrium price will lower the total surplus of the market.

Question

Quizplus · Accepted Answer

A maximum price below the market equilibrium price will result in a shortage of goods, as the quantity supplied will be less than the quantity demanded. This leads to a deadweight loss, the loss of total surplus (consumer and producer surplus) that could have been obtained if the market had been allowed to reach equilibrium. This deadweight loss represents a loss of efficiency and is a disadvantage of government intervention.

A Maximum Price Below the Market Equilibrium Price Will Lower