ECONOMICS
DEMAND
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
Price ceilings lead to ____ and price floors lead to ____
|
|
surplus;shortage
|
|
|
shortage;surplus
|
|
|
Either A or B
|
|
|
None of the above
|
Explanation:
Detailed explanation-1: -A price ceiling above the competitive equilibrium price will result in a surplus. A price ceiling below the competitive equilibrium price will result in a shortage.
Detailed explanation-2: -A binding price floor leads to a surplus while a binding price ceiling leads to a shortage. In both cases though, the actual quantity traded decreases since there is a mismatch between the quantity supplied and quantity demanded.
Detailed explanation-3: -In the case of a price ceiling, producer surplus decreases. (It is the triangle described by the area below
There is 1 question to complete.