Government attempts to set prices below market equilibrium can:

Question

Quizplus · Accepted Answer

Government attempts to set prices below market equilibrium can lead to a decrease in total surplus in the market because it creates excess demand (shortage) as consumers demand more than producers are willing to supply at the lower price, resulting in less overall trade and less value created in the market. This can also lead to inefficient allocation of resources as only a few can obtain the product or service.

Government Attempts to Set Prices Below Market Equilibrium Can