Suppose current equilibrium price of pizza is $5.If the government decides the price of pizza cannot rise above $4,there would be:

Question

Quizplus · Accepted Answer

If the government imposes a price ceiling below the equilibrium price, it creates a situation of excess demand or shortage. In this case, the price ceiling is set at $4, which is below the equilibrium price of $5. Therefore, producers will not be willing to supply as much pizza as consumers demand at the price ceiling. This will result in a shortage of pizzas, where the quantity demanded exceeds the quantity supplied.

Suppose Current Equilibrium Price of Pizza Is $5