Question

The term used to describe market systems attempting to allocate goods in markets that are experiencing a shortage by raising prices, which leads to a decline in quantity demanded?

1) Price ceiling
2) Price floor
3) Price elasticity
4) Price gouging

Answer 1

A price ceiling is the term used to describe market systems attempting to allocate goods in markets that are experiencing a shortage by raising prices, which leads to a decline in quantity demanded.

Step-by-step explanation:

A price ceiling is the term used to describe market systems attempting to allocate goods in markets that are experiencing a shortage by raising prices, which leads to a decline in quantity demanded. When a price ceiling is set below the equilibrium price, quantity demanded exceeds quantity supplied, resulting in a shortage. Sellers may suffer, and those who are not able to purchase the product at all are negatively affected. Price ceilings can have unintended consequences, such as deteriorating quality.