Asked by Daniel Gallups on Jun 01, 2024
Verified
An effective price ceiling will lower the equilibrium price and cause a surplus.
Effective Price Ceiling
A government-imposed limit on how high the price of a product can be charged, set below the market equilibrium to be effective.
Equilibrium Price
The price at which the quantity of a good or service demanded meets the quantity supplied, resulting in a stable market condition.
Surplus
An excess of production or supply over demand, often resulting in lower prices or wasted resources.
- Identify the impacts of price ceilings and price floors on the balance of market equilibrium.
Verified Answer
NB
Narmeen BashirJun 01, 2024
Final Answer :
False
Explanation :
An effective price ceiling, set below the equilibrium price, will lower the price but cause a shortage, not a surplus, because the quantity demanded will exceed the quantity supplied at that price.
Learning Objectives
- Identify the impacts of price ceilings and price floors on the balance of market equilibrium.