Question

Select the correct answer. A price ceiling will usually shift:

a. demand

b. supply

c. both

d. neither

Short answer

Neither

Step-by-step solution

Step.1 Introduction

A price ceiling is an upper limit imposed on the price of product by the government to protect the consumers in the market. Sellers cannot charge a price higher than the limit.

Step.2 Explanation

There is no shift in the demand or supply curve because of the price ceiling. However, a binding price ceiling would cause a movement on the same curves and would create a shortage when quantity demanded is greater than the quantity supplied.