Shortages are associated with price _______;surpluses are associated with price _______.

Question

Quizplus · Accepted Answer

Shortages occur when the quantity demanded is greater than the quantity supplied, which creates upward pressure on prices. A price ceiling, which is a government-imposed limit on how high prices can rise, can create a shortage by preventing prices from reaching their market equilibrium level. Surpluses occur when the quantity supplied is greater than the quantity demanded, which creates downward pressure on prices. A price floor, which is a government-imposed minimum price for a product, can create a surplus by preventing prices from falling to their market equilibrium level. Therefore, shortages are associated with price ceilings (which create a maximum price limit) and surpluses are associated with price floors (which create a minimum price limit).

Shortages Are Associated with Price _______;Surpluses Are Associated with Price