Price ceilings always result in
A) a surplus.
B) fewer mutually beneficial trades taking place.
C) the quantity supplied exceeding the quantity demanded.
D) increased access to price controlled goods.
E) too much production.

Question

Quizplus · Accepted Answer

Price ceilings often lead to shortages because the price that suppliers can charge for a good is set lower than the equilibrium price. This discourages producers from producing as the cost may be too high, thus leading to a decrease in the quantity supplied. Additionally, consumers are incentivized to demand more of the controlled good since it is cheaper, leading to an increase in demand. This combination of decreased supply and increased demand results in a decrease in mutually beneficial trades taking place, as consumers are unable to purchase the amount of the good they desire at the artificially low price.

Price Ceilings Always Result in