Question

Consider the market for pencils. If there is an effective price ceiling for pencils, then: A)...

Consider the market for pencils. If there is an effective price ceiling for pencils, then:

A) quantity demanded is equal to quantity supplied

B) quantity demanded is greater than quantity supplied

C) price is above the equilibrium price

D) quantity demanded is less than quantity supplied

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Homework Answers

Answer #1

Price ceiling is said to exist when there is government intervention in the market and puts a legal limit that how high is the price of any good or service can be

The effective price ceiling is said to exist when it is below the equilibrium price

If it is set below the equilibrium price then there is a case of shortage because quantity demand exceeds quantity supply

Opposite to it is surplus in which the quantity supply is greater than the quantity demanded

So the answer here is is option B

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