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.

Question

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.

Quizplus · Accepted Answer

If the government sets a price ceiling below the equilibrium price, it creates a shortage of the product. In this case, the price ceiling of $1.50 is below the equilibrium price of $2.00, so there will be a shortage of bread. The quantity of wheat demanded and supplied may be affected in the long run, but in the short run, the immediate effect would be a shortage of bread.

Suppose the Equilibrium Price of Bread Is $2