Final answer:
A price ceiling set below equilibrium increases search activities in the market, causing consumers to expend more effort finding products. It also results in a shortage where the quantity demanded exceeds the quantity supplied, as producers are not willing to sell as much at lower prices. The correct option is C.
Step-by-step explanation:
When a price ceiling is implemented below the equilibrium level, it typically leads to increased search activities in the market, as consumers struggle to find the product at the artificially lowered price. If set below the market-clearing price, this is because the price ceiling often results in a shortage: the quantity demanded will exceed the quantity supplied because suppliers are not willing to produce enough at the lower price.
Consumers may have to invest time and resources to find suppliers who are willing to sell at a controlled price. This can include additional time spent shopping around, waiting in lines, or searching for alternative sources.
The impacts on equilibrium price and quantity across different scenarios in both product and labor markets are as follows:
- An increase in demand leads to a higher equilibrium price and a higher quantity.
- A decrease in demand leads to a lower equilibrium price and quantity.
- An increase in supply results in a lower equilibrium price and a higher quantity.
- A decrease in supply leads to a higher equilibrium price and a lower quantity.
These changes reflect the fundamental principles of supply and demand, with price ceilings disrupting the natural market equilibrium.