Asked by April Thompson on May 11, 2024
Verified
If the government imposes a maximum price that is above the equilibrium price,
A) this maximum price will have no economic impact.
B) quantity demanded will be less than quantity supplied.
C) demand will be greater than supply.
D) the available supply will have to be rationed with a nonprice rationing mechanism.
Maximum Price
A price ceiling set by authority to limit how high a price can be charged for a product or service.
Equilibrium Price
The price point at which the supply of a good matches its demand in the market.
Economic Impact
The effect of an event, policy, or business activity on the economy of a specific area, ranging from local to global.
- Analyze the impact of price controls, such as ceilings and floors, on market equilibrium.
Verified Answer
?N
?riana Ngarimu-GoldsmithMay 14, 2024
Final Answer :
A
Explanation :
When a maximum price is set above the equilibrium price, it does not affect the market because the market can still function at the equilibrium price, which is lower than the imposed maximum. Thus, there is no impact on the supply and demand balance.
Learning Objectives
- Analyze the impact of price controls, such as ceilings and floors, on market equilibrium.