Refer to Figure 4-12 which shows the market for vitamins. Suppose the government imposes a price ceiling of Pv. How will the price ceiling affect the quantity supplied, quantity demanded, and quantity exchanged?
What will be an ideal response?
The price ceiling will have no effect on the market outcome. An effective price ceiling must lie below the free market equilibrium. Thus, in this case the market outcome will be determined by forces of demand and supply.
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In the circular-flow diagram, in the markets for
a. goods and services, households and firms are both sellers. b. goods and services, households are sellers and firms are buyers. c. the factors of production, households are sellers and firms are buyers. d. the factors of production, households and firms are both buyers.
In a competitive market, the quantity of a product produced and the price of the product are determined by
a. buyers. b. sellers. c. both buyers and sellers. d. None of the above is correct.