Suppose the equilibrium price of bread is $2.00 per loaf.If the government sets a price ceiling of $1.50 per loaf:
A)the equilibrium price of wheat will fall and a shortage of wheat will be created.
B)the quantity of wheat supplied will increase.
C)the quantity of wheat demanded will decrease.
D)there will be a shortage of bread.
E)there will be a surplus of bread.

Question

Quizplus · Accepted Answer

When the government sets a price ceiling of $1.50 per loaf, it is below the equilibrium price of $2.00. As a result, there will be excess demand for bread at the lower price, leading to a shortage of bread. This is because the quantity supplied will be less than the quantity demanded at the price ceiling. Thus, choice D is the best answer. Choices A, B, C, and E are incorrect.

Suppose the Equilibrium Price of Bread Is $2