The government decides to impose a price ceiling on a good because it thinks that the market-determined price is too high.If it imposes the price ceiling above the equilibrium price:
A) consumers will respond to the higher price and therefore wish to purchase less of the good than at the equilibrium price.
B) producers will respond to the higher price and therefore offer fewer units for sale.
C) consumers will purchase less of the good after the price ceiling is imposed.
D) neither producers nor consumers will change their behaviour.

Question

Quizplus · Accepted Answer

If the price ceiling is imposed above the equilibrium price, there is no change in the behavior of producers or consumers, as the market-determined price is already lower than the ceiling imposed. Therefore, the market will continue to operate at the equilibrium price and quantity, and the price ceiling will have no impact.

The Government Decides to Impose a Price Ceiling on a Good