The government decides to impose a price ceiling on a good because it thinks the market-determined price is too high.If the government imposes the price ceiling below the equilibrium price:
A)consumers will respond to the lower price and wish to purchase more of the good than at the equilibrium price.
B)producers will respond to the lower price and offer more units for sale.
C)consumers will be able to purchase more of the good after the price ceiling is imposed.
D)it will not be binding.

Question

Quizplus · Accepted Answer

When a price ceiling is set below the equilibrium price, it makes the good cheaper than what the market has determined, leading consumers to want to buy more of it because they are getting it at a lower price than they would under equilibrium conditions. Producers, on the other hand, will be less willing to supply the good at the lower price, leading to a shortage.

The Government Decides to Impose a Price Ceiling on a Good