ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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shortage
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surplus
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equilibrium
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shift in the supply curve
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Detailed explanation-1: -Price ceilings are enacted in an attempt to keep prices low for those who demand the product-be it housing, prescription drugs, or auto insurance. But when the market price is not allowed to rise to the equilibrium level, quantity demanded exceeds quantity supplied, and thus a shortage occurs.
Detailed explanation-2: -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-3: -Price ceilings that involve a maximum price below the market price create five important effects: Shortages, Reduction in Product Quality, Wasteful Lines and Other Search Costs, Loss of Gains from Trade & Misallocation of Resources.
Detailed explanation-4: -Answer and Explanation: The correct answer is price ceiling. A price ceiling set below the market equilibrium price causes a shortage. At a price below the market equilibrium price, quantity demanded will exceed quantity supplied.
Detailed explanation-5: -The price ceiling is binding if set below the equilibrium price, leading to a shortage.