Price ceilings:

Question

Price ceilings:

Quizplus · Accepted Answer

Price ceilings set a maximum price that can be charged for a good or service. This reduces the size of the market as the price is artificially low and reduces producer surplus, leading to a decrease in the quantity supplied. Consumers may be willing to buy more at the lower price, but shortages can occur as quantity demanded exceeds quantity supplied. This leads to a decrease in consumer surplus as demand outweighs supply, leading to inefficiencies and deadweight losses. Therefore, price ceilings reduce the size of the market, shrinking both consumer and producer surplus.

Price Ceilings