If a price ceiling is leading to a shortage then:

Question

Quizplus · Accepted Answer

If a price ceiling is leading to a shortage, it means that the price ceiling is below the equilibrium price. This causes a decrease in the quantity of goods supplied by producers (as they are not able to profitably sell the goods at the price ceiling) and an increase in the quantity demanded by consumers (as the goods are now more affordable). This results in a shortage, as there is excess demand compared to supply. Therefore, choice C is correct as the equilibrium price must be above the price ceiling for a shortage to occur. Market forces may try to restore the price to equilibrium, but with a price ceiling in place, this may not be possible.

If a Price Ceiling Is Leading to a Shortage Then