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Figure: Determining Surplus and Loss
-(Figure: Determining Surplus and Loss)In the graph,which price would NOT allow for an effective price ceiling?

Question

Use the following to answer questions 
Figure: Determining Surplus and Loss 
-(Figure: Determining Surplus and Loss)In the graph,which price would NOT allow for an effective price ceiling?

Quizplus · Accepted Answer

An effective price ceiling would be below the equilibrium price, which is $4 in this graph. A price ceiling of $2 or $3 would create a shortage, or excess demand, while a price ceiling of $6 would create a surplus, or excess supply. However, a price ceiling of $10 would have no effect on the market, as it is already above the equilibrium price and suppliers are willing and able to provide the quantity demanded at that price. Therefore, $10 would not allow for an effective price ceiling.

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