Assume a price ceiling is imposed at the current equilibrium price in the market for wheat. If the supply of wheat then decreases as a result of bad weather,
A)a surplus of wheat will be created.
B)a shortage of wheat will be created.
C)the quantity of wheat traded remains the same.
D)the quantity of wheat supplied will increase.

Question

Assume a price ceiling is imposed at the current equilibrium price in the market for wheat. If the supply of wheat then decreases as a result of bad weather,
A)​a surplus of wheat will be created.
B)​a shortage of wheat will be created.
C)​the quantity of wheat traded remains the same.
D)​the quantity of wheat supplied will increase.

Quizplus · Accepted Answer

A price ceiling sets the maximum price that can be charged for a good or service, and if it is set at the current equilibrium price, there will initially be no impact on the market. However, if the supply of wheat decreases due to bad weather, the quantity of wheat supplied will fall below the quantity demanded at the current price. This will create a shortage of wheat in the market and lead to excess demand, as buyers will want to purchase more wheat than is available at the ceiling price. As a result, buyers will compete with each other to obtain limited supplies of the good, leading to long lines or rationing, and some buyers may be unable to purchase any wheat at all. Thus, option B is the correct choice.

Assume a Price Ceiling Is Imposed at the Current Equilibrium