Explanation The given figure shows the impact of price floor and price ceiling in the market:- Price ceiling artificially reduces the price and leads to an increase in demand and decrease in supply. In the above figure, the imposition of the price ceiling fixes the price at P 1 . At price P 1 quantity demanded increase from Q to Q 3 but the quantity supplied is Q 1 . The producers will increase the supply to Q 3 only if the price will increase which is not possible due to price ceilings and hence by constraining the free play of demand and supply, a situation of shortage in the market occurs leading to a reduction in quantity of good traded in the market

7th Edition

ISBN: 9781305757448

Author: Sexton

Publisher: CENGAGE C

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Question

Chapter 5, Problem 7P

To determine

The reason behind the reduction in quantity of goods traded in market after price floors and price ceilings.

Expert Solution & Answer

Chapter 5 Solutions

EXPLORING ECON.-W/ACCESS (LL) >CUSTOM<

Ch. 5 - Prob. 1P Ch. 5 - Prob. 2P Ch. 5 - Prob. 3P Ch. 5 - Prob. 4P Ch. 5 - Prob. 5P Ch. 5 - Prob. 6P Ch. 5 - Prob. 7P Ch. 5 - Prob. 8P Ch. 5 - Prob. 9P Ch. 5 - Prob. 10P

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