Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter3: Demand And Supply
Section: Chapter Questions
Problem 7SCQ: What is the effect of a price ceiling on the quantity demanded of the product? What is the effect of...
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![What is the effect of a price ceiling implemented below equilibrium price?
Surplus
No Effect
None of the these answers
Shortage](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F44ba84ef-fbb4-4f4d-b035-37a11112949f%2F6937b36c-98aa-4959-bf44-1cca2d388427%2F67tnvt_processed.png&w=3840&q=75)
Transcribed Image Text:What is the effect of a price ceiling implemented below equilibrium price?
Surplus
No Effect
None of the these answers
Shortage
Expert Solution
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Step 1
A price ceiling is the maximum price that a supplier can charge. At the same time, an equilibrium price is a price that producers are willing to accept and consumers are willing to pay. If the equilibrium price is above the price ceiling, it shows that the suppliers are not getting what they can get. This leads to a fall in the supply in the economy and a rise in demand. Thus, there will be a shortage in an economy due to lower supply and higher demand.
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