An effective price ceiling will most likely result in which of the following?
A)an increase in producer surplus
B)an increase in consumer surplus
C)a decrease in consumer surplus
D)no change in either producer or consumer surplus

Question

Quizplus · Accepted Answer

An effective price ceiling is set below the equilibrium price level, which results in an excess demand for the product. This means that more consumers want to buy the product than producers are willing or able to sell at the price ceiling. In this situation, some consumers are able to buy the product at a lower price due to the price ceiling, resulting in an increase in consumer surplus. Producer surplus decreases as they are forced to sell the product at a lower price, and some producers may choose not to produce the product at all. Therefore, the most likely outcome of an effective price ceiling is an increase in consumer surplus and a decrease in producer surplus.

An Effective Price Ceiling Will Most Likely Result in Which