Final answer:
Producers have an incentive to lower the quality of a good when the government imposes price ceilings. This is because price ceilings create a shortage by not allowing the market price to rise to the equilibrium level, leading to excess demand.
As a result, sellers may lower the quality of the good to meet the reduced price.
Step-by-step explanation:
Producers have an incentive to lower the quality of a good when the government imposes price ceilings.
Price ceilings are enacted in an attempt to keep prices low for those who need the product.
However, when the market price is not allowed to rise to the equilibrium level, quantity demanded exceeds quantity supplied, and thus a shortage occurs.
Those who manage to purchase the product at the lower price given by the price ceiling will benefit, but sellers of the product will suffer, along with those who are not able to purchase the product at all. Quality is also likely to deteriorate.