If a price ceiling of $8 were placed in the market in the graph shown:

Question

Quizplus · Accepted Answer

A price ceiling of $8 is below the equilibrium price of $10, which means that there will be excess demand or a shortage of the product. To allocate the available supply among consumers, some form of non-price rationing mechanism would have to be set up, such as a lottery or waiting list. Some surplus is transferred from producers to consumers because producers are forced to sell their product at a lower price, which reduces their revenue and profits. Consumers benefit from lower prices and some may be able to purchase the product when they couldn't before due to the higher price. However, not all consumers are necessarily made better off since the non-price rationing mechanism might favor some consumers over others based on factors other than willingness to pay.

If a Price Ceiling of $8 Were Placed in the Market