What is the correct answer?


An effective price ceiling usually results in:

A. Excess demand

B. Qd > Qs

C. Shortage of supply

D. All of the above

Correct Answer :

D. All of the above

Price Ceiling ?A price ceiling occurs when the government puts a legal limit on how high the price of a product can be. In order for a price ceiling to be effective, it must be set below the market equilibrium price. When a price ceiling is set, a shortage occurs. For the price that the ceiling is set at, there is more demand (excess demand) than there is at the equilibrium price. There is also less supply than there is set at the equilibrium price (shortage of supply), thus there is more quantity demanded than quantity supplied.}

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