Final answer:
A price ceiling set below equilibrium causes quantity demanded to increase and quantity supplied to decrease, leading to a shortage and potential quality deterioration.
Step-by-step explanation:
When a price ceiling is set below the equilibrium level, it directly affects both the quantity demanded and quantity supplied of a product. At the imposed lower price, more consumers are willing to purchase the product as it becomes more affordable, leading to an increase in quantity demanded.
However, suppliers are less motivated to produce the product because they are receiving a lower price than what the market would have naturally determined, which leads to a decrease in quantity supplied. Consequently, a shortage occurs because the quantity demanded exceeds the quantity supplied at the price ceiling level.
This often results in consumers facing difficulties in purchasing the product and can reduce the overall quality of the product, as less revenue for producers could mean less investment in quality control.