(Figure: Supply and Demand in the Market for Cappuccinos) Use Figure: Supply and Demand in the Market for Cappuccinos. A price ceiling of $4 causes:
A)a shortage equal to the distance AB.
B)a surplus equal to the distance AB.
C)a shortage equal to the distance DE.
D)no change to the market.

Question

(Figure: Supply and Demand in the Market for Cappuccinos) Use Figure: Supply and Demand in the Market for Cappuccinos. A price ceiling of $4 causes: 
A)a shortage equal to the distance AB. 
B)a surplus equal to the distance AB. 
C)a shortage equal to the distance DE. 
D)no change to the market.

Quizplus · Accepted Answer

A price ceiling of $4 is below the equilibrium price in the market for cappuccinos, causing a shortage of quantity demanded (Qd) and quantity supplied (Qs). The distance DE represents the quantity of cappuccinos demanded at a price of $4, and the distance EF represents the quantity of cappuccinos supplied at that price. Since Qd < Qs at a price of $4, there is a shortage equal to the distance DE. Therefore, choice C is the correct answer.