Suppose the Brazilian government sets the price of coffee at $1 per pound when the market price is $10 per pound. The government's action will:

Question

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When the government sets the price of a good lower than market price, it creates an artificial shortage because fewer producers are willing to supply the good at the lower price, while more consumers are willing to purchase it at the lower price. This creates excess demand, which cannot be satisfied at the government-set price. Therefore, a shortage of coffee is likely to occur, even in Brazil which is one of the largest coffee-producing countries in the world.

Suppose the Brazilian Government Sets the Price of Coffee at $1