Question

During a cold winter, there is a natural-gas shortage. The government sets a price ceiling on natural gas so that people can continue to afford heating. If the price ceiling remains in effect, what will happen?

1) Quantity demanded will exceed the quantity supplied.
2) Quantity demanded will equal the quantity supplied.
3) Quantity demanded and supplied will reach price equilibrium.
4) Quantity demanded will be lower than the quantity supplied.

Answer 1

A price ceiling is a legal maximum price set by the government to keep prices low for those who need the product. In the case of a natural gas shortage during a cold winter, a price ceiling on natural gas would be implemented to ensure people can continue to afford heating. However, when the price ceiling is set below the equilibrium price, the quantity demanded will exceed the quantity supplied, resulting in a shortage.

Step-by-step explanation:

A price ceiling is a legal maximum price set by the government to keep prices low for those who need the product. In the case of a natural gas shortage during a cold winter, a price ceiling on natural gas would be implemented to ensure people can continue to afford heating. However, when the price ceiling is set below the equilibrium price, the quantity demanded will exceed the quantity supplied, resulting in a shortage.