Question

The price ceiling causes quantity group of answer choices demanded to exceed quantity supplied by 45 units. demanded to exceed quantity supplied by 85 units. supplied to exceed quantity demanded by 45 units. The price ceiling causes quantity supplied to exceed quantity demanded by 85 units.

a) True
b) False

Answer 1

A price ceiling set below the equilibrium price causes the quantity demanded to exceed the quantity supplied, creating a shortage. The exact extent of this shortage in terms of units cannot be specified without additional market data.

Step-by-step explanation:

When analyzing the effects of a price ceiling on market outcomes, it's essential to understand that a price ceiling is a legal maximum price set below the equilibrium price. This restriction causes the quantity demanded to increase, as the lower price encourages consumers to purchase more. However, at this lower price, producers are less willing to supply the market, leading to a decrease in quantity supplied. As a result, there is a gap between the quantity demanded and the quantity supplied - a condition known as a shortage.

The correct statement regarding the impact of a price ceiling is that it causes the quantity demanded to exceed the quantity supplied. This excess demand, or shortage, happens because the ceiling prevents the price from rising to the equilibrium level where the quantity demanded would equal the quantity supplied.

Therefore, the statement that a price ceiling causes the quantity demanded to exceed quantity supplied is true, but the exact number of units (either 45 or 85) cannot be determined without specific market data.

Answer 2

A price ceiling set below the market equilibrium causes quantity demanded to rise and quantity supplied to fall, leading to a shortage where demand exceeds supply.

Step-by-step explanation:

When a price ceiling is set below the equilibrium price, it becomes a binding constraint on the market that typically results in a shortage. This is because the imposed price is lower than what the market would naturally set, causing the quantity demanded to increase while the quantity supplied decreases.

Consequently, there is an excess demand, where the quantity demanded exceeds the quantity supplied, leading to a shortfall in the market. This excess demand is a direct result of the price ceiling's effect on market dynamics. It is important to note that a

price ceiling does not shift the demand or supply curves; instead, it sets a maximum price that can be legally charged, disrupting the natural market equilibrium.

A price ceiling is a legal maximum price set below the equilibrium price. It causes the quantity demanded to exceed the quantity supplied, resulting in a shortage.