TABLE 4-4

-Refer to Table 4-4. If the government intervenes in the market for milk and sets a price ceiling of $0.90 per litre, what will be the result?

Question

TABLE 4-4
 
-Refer to Table 4-4. If the government intervenes in the market for milk and sets a price ceiling of $0.90 per litre, what will be the result?

Quizplus · Accepted Answer

Setting a price ceiling below the equilibrium price would create a shortage of milk where the quantity demanded exceeds the quantity supplied. In this case, the quantity demanded at the price ceiling of $0.90 per litre is 3200 litres, while the quantity supplied is only 2000 litres. Therefore, some consumers will not be able to buy milk at that price, resulting in a shortage of milk. Option A is incorrect as, at a price ceiling, sellers are unable to sell milk above that price rather than below that price. Option C and D are incorrect as the shortage or surplus is not definite or predictable.

TABLE 4-4 -Refer to Table 4-4. If the Government Intervenes in the Government