Asked by Hannah Hanson on May 22, 2024
Verified
Suppose current equilibrium price of pizza is $5.If the government decides the price of pizza cannot rise above $4,there would be:
A) a shortage of pizzas.
B) a surplus of pizzas.
C) a rightward shift of the supply curve of pizzas.
D) no impact on the equilibrium price and quantity of pizzas.
E) a rightward shift in the demand curve for pizzas.
Equilibrium Price
The price at which the quantity of a product offered for sale matches the quantity being demanded, resulting in no net surplus or shortage in the market.
Supply Curve
A graph that shows the relationship between the price of a good and the quantity supplied.
- Acknowledge the ramifications of government-enforced price caps on the supply and demand dynamics.
Verified Answer
AO
Ashly OlsenMay 28, 2024
Final Answer :
A
Explanation :
If the government imposes a price ceiling below the equilibrium price, it creates a situation of excess demand or shortage. In this case, the price ceiling is set at $4, which is below the equilibrium price of $5. Therefore, producers will not be willing to supply as much pizza as consumers demand at the price ceiling. This will result in a shortage of pizzas, where the quantity demanded exceeds the quantity supplied.
Learning Objectives
- Acknowledge the ramifications of government-enforced price caps on the supply and demand dynamics.