Assume no price ceiling exists and a market is in equilibrium. Then a price ceiling is established which is below the market equilibrium. What would result?
A) Shortage.
B) Equilibrium.
C) Surplus.
D) Equity.

Question

Quizplus · Accepted Answer

A price ceiling is a legal price control where a maximum price is established by the government, which is below the market equilibrium. When a price ceiling is established below the equilibrium price, it creates a shortage in the market. The quantity demanded by consumers will exceed the quantity supplied by producers, resulting in excess demand or shortage. This shortage will lead to queuing, rationing, and black markets as consumers try to buy the product at the lower price. Therefore, the best choice is A) Shortage.

Assume No Price Ceiling Exists and a Market Is in Equilibrium