A price ceiling

A. does increase the amount of the product that consumers buy because it lowers the price.

B. does increase the amount of the product that consumers buy because it creates a surplus.

C. does not increase the amount of the product that consumers buy because it creates a shortage.

D. does not increase the amount of the product that consumers buy because it creates a surplus.

E. both a and b.

Question

Morris

Social Studies

9 May, 03:51

A price ceiling

A. does increase the amount of the product that consumers buy because it lowers the price.

B. does increase the amount of the product that consumers buy because it creates a surplus.

C. does not increase the amount of the product that consumers buy because it creates a shortage.

D. does not increase the amount of the product that consumers buy because it creates a surplus.

E. both a and b.

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Answers (1)

Know the Answer?

Korbin · Answer 1

The correct answer is C.

Explanation:

A price ceiling is an economics term that refers to a type of price control where a limit is set on how high the price of a good or service can be. Price ceilings are mostly imposed by the government, usually during times of crisis, in order to protect consumers from having to pay extraordinary amounts for certain commodities.

Price ceilings are often frowned upon by economists for their tendency to create shortages. This is because when there's a price ceiling, producers are discouraged as they can feel the price does not match the price the goods should be sold for in a free market, so it's not profitable for them to produce them. Also, shortages are created because sellers tend to hoard goods and sell them on the black market for a higher price. For these two reasons, a price ceiling does not increase the amount of the product that consumers buy because it creates a shortage.