Principles of Microeconomics, 7th Edition

Published by South-Western College
ISBN 10: 128516590X
ISBN 13: 978-1-28516-590-5

Chapter 6 - Part II - Supply, Demand, and Government Policies - Quick Check Multiple Choice - Page 129: 2

Answer

c. increase, decrease, shortage

Work Step by Step

A price ceiling is a legal maximum on the price at which a good must be sold. Since the price ceiling moves the price below the existing equilibrium price, the quantity demanded is greater than the quantity supplied of the good at the new market price, so there will be a shortage. Increasing the price ceiling moves the price closer towards the original equilibrium price, which reduces the shortage.
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