Recall Application 1, "Hurricane Katrina and the Baton Rouge Housing Prices," to answer the following questions:
-If the government mandated that the average price of houses in Baton Rouge stay at $136,000 after Hurricane Katrina, we would expect that the housing market in Baton Rouge would experience:

Question

Quizplus · Accepted Answer

If the government mandates a specific price for houses in Baton Rouge, it would create a price ceiling. At this ceiling price, quantity demanded would exceed quantity supplied, creating a shortage of houses. This is because sellers would not be willing to sell their houses at the specified price, while potential buyers would be willing to pay more than the specified price. This would result in a situation where some buyers would not be able to find a house to purchase, even though there may be willing sellers. Hence, option B is the best choice.