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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

Neither

Step by step solution

01

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.

02

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.

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Most popular questions from this chapter

Name some factors that can cause a shift in the

supply curve in labor markets.

Are households demanders or suppliers in the

goods market? Are firms demanders or suppliers in the

goods market? What about the labor market and the

financial market?

Identify the most accurate statement.

A price floor will have the largest effect if it is set:

a. substantially above the equilibrium price. b. slightly above the equilibrium price.

c. slightly below the equilibrium price.

d. substantially below the equilibrium price.

Sketch all four of these possibilities on a demand and supply diagram to illustrate your answer

What would be a sign of a shortage in financial markets?

Identify each of the following as involving either demand or supply. Draw a circular flow diagram and label the flows A through F. (Some choices can be on both sides of the goods market.)

a. Households in the labor market

b. Firms in the goods market

c. Firms in the financial market

d. Households in the goods market

e. Firms in the labor market

f. Households in the financial market
See all solutions

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