Asked by Grace Dillon on Jun 30, 2024
Verified
Which of the following observations would be consistent with the imposition of a price ceiling that is higher than equilibrium price? After the price ceiling is established,
A) there will be no effect on the market price or quantity sold.
B) a smaller quantity of the good is demanded.
C) a larger quantity of the good is supplied.
D) the price rises above the previous equilibrium.
Price Ceiling
A regulatory limit placed on the amount that can be charged for commodities and services, to prevent market imbalances.
Equilibrium Price
The price at which the quantity of a good or service supplied matches the quantity demanded, leading to market stability.
Market Price
The price at which goods and services are bought and sold in a competitive marketplace, reflecting supply and demand dynamics.
- Explain the impact of implementing a price floor and a price ceiling on achieving market equilibrium.
Verified Answer
KJ
Kashmir JansenJul 01, 2024
Final Answer :
A
Explanation :
A price ceiling set above the equilibrium price does not affect the market because the market price is naturally lower than the ceiling, allowing supply and demand to determine price and quantity as if the ceiling were not there.
Learning Objectives
- Explain the impact of implementing a price floor and a price ceiling on achieving market equilibrium.