Final answer:
An effective price ceiling on potato chips would lead to an increase in quantity demanded and a decrease in quantity supplied, resulting in a shortage. This is because the imposed price is below the market equilibrium, encouraging more consumers to buy and discouraging producers from selling.
Step-by-step explanation:
When a government institutes an effective price ceiling on a product like potato chips, it sets a maximum price for the product that is below the market equilibrium. This results in an increase in quantity demanded for potato chips because consumers are more willing to purchase the product at the lower price. However, there is a decrease in quantity supplied, as producers are less inclined to sell their product at this lower price. These dynamics do not decrease the demand for potato chips, but rather they lead to a shortage as the quantity demanded at this lower price exceeds the quantity supplied.
The correct answer to the student's question is that there would be a decrease in quantity supplied of potato chips, not a decrease in demand. The supply curve moves upwards (or to the left) due to the price ceiling, indicating a decrease in quantity supplied at each and every price level below the equilibrium.