Setting a price ceiling below the equilibrium price can result in
A) a surplus,where the quantity demanded exceeds the quantity supplied.
B) a shortage,where the quantity demanded exceeds the quantity supplied.
C) a surplus,where the quantity supplied exceeds the quantity demanded.
D) a shortage,where the quantity supplied exceeds the quantity demanded.
E) no impact on the quantity demanded or on the quantity supplied.

Question

Quizplus · Accepted Answer

Setting a price ceiling below equilibrium price creates a shortage, as the demand for the product exceeds the supply. This is because the lower price makes consumers want to buy more, but at the same time, suppliers are unwilling to produce as many units due to the lower profit margin. Thus, a shortage occurs where the quantity demanded exceeds the quantity supplied.

Setting a Price Ceiling Below the Equilibrium Price Can Result