A price ceiling that is set below the equilibrium price
A)causes suppliers to lose money.
B)creates a shortage.
C)is non-binding.
D)creates a surplus.

Question

Quizplus · Accepted Answer

A price ceiling set below the equilibrium price causes a shortage because it creates excess demand for the product/service at the lower price, which cannot be met by the reduced supply available at the lower price. Thus, there is excess demand or a shortage.

A Price Ceiling That Is Set Below the Equilibrium Price