Question

Price of Good X Quantity Demanded Quantity Supplied

$10 220 90
11 200 100
12 180 130
13 150 150
14 120 190
15 80 260
Suppose that the government imposes a price ceiling at a price of $11. How many fewer units would be exchanged at the price ceiling than would be exchanged at the equilibrium price?
a. 50
b. 30
c. 40
d. 70

Answer 1

Option a is the correct answer.

So, at a price ceiling of $11, 50 fewer units will be exchanged in the market.

Step-by-step explanation:

The equilibrium point is a point where the quantity demanded of a good at a certain price is equal to the quantity supplied of the good at that price. The equilibrium point of Good X is at $13 per unit as at this price the quantity demanded equals quantity supplied.

Equilibrium price = $13

Equilibrium Quantity = 150 units

A price ceiling is a governmental control on the maximum price that can be charged for a product. The government uses this tool to protect consumers from high prices.

If the government imposes a price ceiling at $11, this means that the maximum price that can be charged for the product is $11. In case the price ceiling is less than the equilibrium price, it creates a shortage in the market and vice versa.

Thus, at a price ceiling of $11, the quantity demanded for the product will be 200 units while only 100 units of the product will be supplied. SO, the market will only satisfy a demand of 100 units.

The difference between the exchange at the equilibrium price and at price ceiling is,

Difference = 150 units - 100 units

Difference = 50 units

So, at a price ceiling of $11, 50 fewer units will be exchanged in the market.