Figure SEQ Figure 1
-When considering the imposition of a price ceiling of $6 in Figure 1, the group that will benefit the most is
A)Consumers
B)Producers
C)Both consumers and producers
D)None, the net gain is zero

Question

Figure SEQ Figure  1 
-When considering the imposition of a price ceiling of $6 in Figure 1, the group that will benefit the most is
A)Consumers 
B)Producers 
C)Both consumers and producers 
D)None, the net gain is zero

Quizplus · Accepted Answer

When a price ceiling is implemented, it sets a maximum price at which a good can be sold. In this case, the price ceiling is set at $6. Since the equilibrium price in Figure 1 is $8, this means that the price ceiling will create a shortage of the good (QD > QS) as producers do not have the incentive to produce as much at the lower price. 
This shortage will benefit consumers as they will have access to the good at a lower price. This is because the price they pay is fixed at $6 even though the equilibrium price would have been $8. Therefore, consumers will benefit from the price ceiling the most as they get the same quantity of the good at a cheaper price. Producers, on the other hand, will not benefit as they will produce less at the lower price ceiling and thus have less profit.