Explain why a price ceiling, when applied to a market, inevitably generates chronic excess demand for the good
A price ceiling sets the allowable price below its equilibrium level. Because it is below equilibrium price,
quantity supplied is less than the quantity supplied at equilibrium and quantity demanded is greater than
quantity demanded at equilibrium. The gap between quantity demanded and quantity supplied at the below-
equilibrium price, that is, at the price ceiling, remains.
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What is the cost of producing an additional unit of output?
a. the firm's marginal cost b. the firm's variable cost c. the firm's productivity offset d. the firm's average variable cost
Which of the following statements explains the vicious circle of poverty?
A. By investing in education and infrastructure at the same time, the country can overcome the problems of poverty. B. Poverty arises out of the lack of investment, but countries cannot invest because they are poor. C. A nation can shift its production possibilities curve inward by shifting more resources into the production of capital goods. D. A nation can shift its production possibilities curve outward by shifting more resources into the production of consumer goods.