The diagram below represents the market for butter.
FIGURE 4-1

-Refer to Figure 4-1. If a price ceiling of $4 is imposed, how many units of butter will be sold?

Question

The diagram below represents the market for butter.
FIGURE 4-1
 
-Refer to Figure 4-1. If a price ceiling of $4 is imposed, how many units of butter will be sold?

Quizplus · Accepted Answer

A price ceiling set below the equilibrium price (which is the case here, assuming the equilibrium price is higher than $4) leads to a quantity demanded that exceeds the quantity supplied. The actual number of units sold will be at the quantity supplied at the price ceiling, not the quantity demanded, because the quantity that can be sold is limited by how much is available for sale.

The Diagram Below Represents the Market for Butter