Asked by Isabel Sanchez on Jul 28, 2024
Verified
The government decides to impose a price ceiling on a good because it thinks the market-determined price is too high.If the government imposes the price ceiling below the equilibrium price:
A) consumers will respond to the lower price and wish to purchase more of the good than at the equilibrium price.
B) producers will respond to the lower price and offer more units for sale.
C) consumers will be able to purchase more of the good after the price ceiling is imposed.
D) it will not be binding.
Price Ceiling
A legal maximum price that can be charged for a good or service, intended to protect consumers from price gouging.
Equilibrium Price
The price at which the quantity of a good supplied equals the quantity demanded, resulting in market equilibrium.
Market-Determined Price
A price outcome established through the interaction of supply and demand, without external controls.
- Examine the outcomes of governmental policies in the economic market, particularly the implementation of maximum price constraints below the equilibrium price.
Verified Answer
YL
Yasmine LewisJul 30, 2024
Final Answer :
A
Explanation :
When a price ceiling is set below the equilibrium price, it makes the good cheaper than what the market has determined, leading consumers to want to buy more of it because they are getting it at a lower price than they would under equilibrium conditions. Producers, on the other hand, will be less willing to supply the good at the lower price, leading to a shortage.
Learning Objectives
- Examine the outcomes of governmental policies in the economic market, particularly the implementation of maximum price constraints below the equilibrium price.