-The above figure shows the market for winter jackets.In an effort to keep the nation warm,the president places a price ceiling of $100 in the market for winter jackets.When the price ceiling is in place and taking account of the resources lost in search,consumer surplus ________ and producer surplus ________ compared to the equilibrium before the price ceiling was imposed.
A) decreases; increases
B) decreases; decreases
C) increases; increases
D) increases; decreases
E) does not change; increases

Question

-The above figure shows the market for winter jackets.In an effort to keep the nation warm,the president places a price ceiling of $100 in the market for winter jackets.When the price ceiling is in place and taking account of the resources lost in search,consumer surplus ________ and producer surplus ________ compared to the equilibrium before the price ceiling was imposed.
A) decreases; increases 
B) decreases; decreases 
C) increases; increases 
D) increases; decreases 
E) does not change; increases

Quizplus · Accepted Answer

A price ceiling set below the equilibrium price (in this case, $100) typically leads to a decrease in producer surplus because producers are receiving less for their goods than they would at equilibrium. Consumer surplus also decreases because the lower price leads to shortages, meaning some consumers who are willing to pay more for the product cannot obtain it. Additionally, resources lost in search efforts (time and money spent looking for the scarce product) further reduce the overall welfare, impacting both consumer and producer surplus negatively.

-The Above Figure Shows the Market for Winter Jackets