A price ceiling set below the market clearing price will tend to cause which of the following?
A) a surplus
B) a shortage
C) an increase in demand
D) a reduction in supply

Question

Quizplus · Accepted Answer

A price ceiling set below the market clearing price will cause a shortage because at the lower price, quantity demanded will exceed quantity supplied. As more consumers demand the good at the lower price, producers may face higher costs or lower profits, leading to a reduction in supply in the long term. However, in the short term, producers may be willing to sell some goods at the lower price, leading to a temporary shortage.

A Price Ceiling Set Below the Market Clearing Price Will