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Chapter 4: Q.12 (page 104)

Select the correct answer.

A price ceiling will usually shift:

a. demand

b. supply

c. both

d. neither

Short Answer

Expert verified

d.neither.

Step by step solution

01

Definition

A price ceiling is an upper limit imposed on the price of a product. This limit is imposed to protect the consumers in the market to ensure that they don't have to pay a price too high.

02

Explanation

Neither. A change in demand or supply indicates that at any given price, more or less is demanded or provided. A price ceiling has no effect on the demand or supply curves. If the price ceiling is set lower than the equilibrium, the amount required on the demand curve will exceed the quantity supplied on the supply curve, resulting in excess demand.

03

Conclusion

Therefore, it will produce excess demand because the quantity demanded on the demand curve will be more than the quantity delivered on the supply curve.

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