Final answer:
Over longer periods, demand is cyclical, not directly affected by a price ceiling, which neither shifts demand nor supply. Instead, a price ceiling creates a maximum legal price, leading to shortages if set below equilibrium.
Step-by-step explanation:
Over longer periods of time, demand tends to be cyclical. This means that demand for goods and services can rise and fall due to a variety of factors, such as economic conditions, seasons, and trends. Considering price ceilings and their effects on markets, we discuss the question: A price ceiling will usually shift:
- a. demand
- b. supply
- c. both
- d. neither
The correct answer here is d. neither. A price ceiling is a legal maximum on the price at which a good can be sold. It does not directly shift the demand or supply curve. However, it can result in a shortage when the ceiling is below the equilibrium price, as it causes demand to exceed supply. When considering the adjustment process in a constant-cost industry, an increase in demand met with an equal increase in supply typically means that the equilibrium price stays constant, as more quantity is sold at the same price.