Suppose the equilibrium price in a market is $5, and the government imposes a $4.50 price ceiling. This will
A) Create excess demand.
B) Create excess supply.
C) Shift the supply curve to the left.
D) Have no effect.

Question

Quizplus · Accepted Answer

When a price ceiling is set below the equilibrium price, it creates excess demand as consumers want to purchase more goods at the lower price, while at the same time, suppliers are less willing to supply the goods at the lower price. This creates a shortage in the market.

Suppose the Equilibrium Price in a Market Is $5, and the Government