The table given below reports the quantity demanded and supplied of a commodity at different prices in a market.Table 3.5

-Refer to Table 3.5. If government imposes a price ceiling of $4:
A)the price ceiling will not have an effect.
B)the price will fall to $1 because producers will be forced to incur losses.
C)demand will increase.
D)a surplus will result equal to 20 units.
E)a shortage will result equal to 20 units.

Question

The table given below reports the quantity demanded and supplied of a commodity at different prices in a market.Table 3.5
 
-Refer to Table 3.5. If government imposes a price ceiling of $4:
A)the price ceiling will not have an effect. 
B)the price will fall to $1 because producers will be forced to incur losses. 
C)demand will increase. 
D)a surplus will result equal to 20 units. 
E)a shortage will result equal to 20 units.

Quizplus · Accepted Answer

A price ceiling of $4 would not have an effect as the equilibrium price in the market is already below the ceiling at $3. At this equilibrium price, the quantity demanded and supplied are already equal at 80 units. Therefore, a price ceiling below the equilibrium price would not impact the market.

The Table Given Below Reports the Quantity Demanded and Supplied