Final answer:
A price ceiling set below the equilibrium price leads to increased quantity demanded and decreased quantity supplied, resulting in a shortage. The correct option is B) Shortage
Step-by-step explanation:
When the government imposes a price ceiling that is below the market equilibrium price, it creates a situation where the quantity demanded increases but the quantity supplied decreases. This discrepancy between demand and supply leads to a shortage, which is characterized by consumers wanting to buy more of the product than what is available at that price.
Those who can buy the product at the price ceiling may benefit; however, some consumers might be left without the product. This can also lead to a drop in product quality as suppliers attempt to reduce costs to cope with the lower pricing.
A price ceiling is a legal maximum price set by the government in an attempt to keep prices low. When a price ceiling is set below the equilibrium price, it creates a shortage in the market. This is because the quantity demanded exceeds the quantity supplied at the lower price.
For example, let's say the equilibrium price for a product is $10, but the government imposes a price ceiling of $8. At this lower price, more consumers would want to purchase the product, resulting in a higher quantity demanded.
However, suppliers would be less willing to produce and sell the product at the lower price, leading to a lower quantity supplied. The difference between the quantity demanded and the quantity supplied is the shortage.
The correct option is B) Shortage