When the government imposes a price ceiling on a good whose price is too high,
A) surpluses are created.
B) supply will increase to meet the demand.
C) chronic excess demand occurs.
D) quantity demanded of the good will fall.

Question

Quizplus · Accepted Answer

When a price ceiling is imposed, the maximum price that can be charged for the good is set lower than the market equilibrium price. This leads to a chronic excess demand for the good, as consumers want to buy more of the good at the lower price, but suppliers are unwilling or unable to supply as much of the good at the lower price. This results in shortages, long waiting lines or black markets.

When the Government Imposes a Price Ceiling on a Good