Exhibit 4.7

-Suppose the current equilibrium price of pizza is $5. If the government decides the price of pizza cannot rise above $4, there would be _____

Question

Exhibit 4.7
 
-Suppose the current equilibrium price of pizza is $5. If the government decides the price of pizza cannot rise above $4, there would be _____

Quizplus · Accepted Answer

If the government sets a price ceiling of $4 on pizza, this will create a situation where the quantity demanded of pizza will be greater than the quantity supplied at the price of $4. This is because the price ceiling creates a situation where the market price is below the equilibrium price. The shortage of pizzas will result in long lines and people not getting the pizza they want.

Exhibit 4.7 -Suppose the Current Equilibrium Price of Pizza Is $5. If