Even though shortages typically result from the imposition of price ceilings, the overall gains in economic efficiency outweigh the costs.

Question

Quizplus · Accepted Answer

Shortages resulting from price ceilings represent a misallocation of resources, as they signal that demand exceeds supply even though this may not be the case. This leads to rationing and the emergence of black markets, which create inefficiencies and reduce social welfare. Therefore, the costs of price ceilings in terms of reduced economic efficiency and social welfare typically exceed any benefits they may confer, such as protecting consumers from high prices.

Even Though Shortages Typically Result from the Imposition of Price