Figure 2.1

-Assume that the market described by the demand and supply curves in Figure 2.1 is originally in equilibrium. What is the most likely consequence of a government-imposed price ceiling (maximum price that producers are allowed to charge) of $10 per unit?

Question

Figure 2.1
 
-Assume that the market described by the demand and supply curves in Figure 2.1 is originally in equilibrium. What is the most likely consequence of a government-imposed price ceiling (maximum price that producers are allowed to charge) of $10 per unit?

Quizplus · Accepted Answer

A government-imposed price ceiling below the equilibrium price typically results in a decrease in the quantity supplied because producers are less willing or able to supply the good at the lower price. This leads to a shortage, not a surplus, and does not inherently increase demand or supply.

Figure 2.1 -Assume That the Market Described by the Demand and Supply