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1. Why does a price ceiling set above the equilibrium price have no effect on the...

1. Why does a price ceiling set above the equilibrium price have no effect on the market?

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Answer #1

Price ceiling are effective only when they are set below the equilibrium price. Price ceiling is the lint set by government that producers of good should not exceed that limit.

When Price ceiling is higher than Equilibrium price then at that Price Supply is higher than the demand and surplus occurs in market hence net excess demand is seen to be negative which provides unstable new equilibrium

therefore to experience the effect of price ceiling they should be set below equilibrium

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