Statement I: A price floor will always have an effect on a market.
Statement II: A price ceiling which has been set above equilibrium will cause a shortage.

Question

Quizplus · Accepted Answer

Statement I is false because a price floor will only have an effect if it is set above the equilibrium price, otherwise, it is non-binding and does not affect the market. Statement II is false because a price ceiling set above equilibrium will not cause a shortage; it is non-binding and has no effect. Shortages occur when a price ceiling is set below the equilibrium price.

Statement I: a Price Floor Will Always Have an Effect