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Chapter 3: Q 27. (page 78)

Does a price ceiling attempt to make a price higher or lower?

Short Answer

Expert verified

Price ceiling attempts to make a price lower.

Step by step solution

01

Step 1. Define price ceiling.

When the price charged is greater than or less than the equilibrium price set by market forces of demand and supply, it is referred to as a price ceiling.

02

Step 2. Is a price ceiling intended to raise or lower a price?

A price ceiling is a legal limit on how much a commodity can be sold for.

A price ceiling is an attempt to reduce a price. For instance, housing is a requirement. Everyone requires a place to call home. If there is no rent ceiling, landlords can charge exorbitant rents that may not be affordable to all.

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Most popular questions from this chapter

How does a price floor set above the equilibrium level affect quantity demanded and quantity supplied?

Suppose both of these events took place at the same time. Combine your analyses of the impacts of the iPod and the tariff reduction to determine the likely impact on the equilibrium price and quantity of Sony Walkman-type products. Show your answer graphically.

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