Suppose that the market equilibrium price of TVs is $250,but manufacturers are not allowed to charge more than $200 due to a government regulation.Which of the following would be a definite result of imposing a maximum price?

Question

Quizplus · Accepted Answer

When a maximum price is imposed, it creates a situation of excess demand or a shortage. This means that not all the consumers who want to purchase the good at the lower price can do so, and some suppliers may choose not to produce at the lower price. This results in a decrease in producer surplus, as they are unable to sell their goods at the market price. Consumer surplus may or may not increase, depending on how much of the shortage is filled by rationing mechanisms (such as first-come, first-served) or by non-monetary costs (such as waiting in line). Government revenue is not affected by this scenario, as a maximum price does not involve a tax or subsidy.

Suppose That the Market Equilibrium Price of TVs Is $250,but