Price Ceilings and Economic Effects Quiz

It is a legal restriction on the maximum price of a good or service.

It results in a situation where quantity demanded exceeds quantity supplied, leading to shortages.

It is intended to ensure that certain goods remain affordable for consumers.

It does not lead to an excess supply; instead, shortages are common.

Consumers demand less due to the lower price, leading to a decrease in quantity demanded.

It reduces the area of consumer surplus in the market.

The imbalance between supply and demand creates a potential for illegal markets.

Producers have less motivation to produce when they cannot charge higher prices.

Goods and services may become scarce due to suppressed production.

Producers may compromise on quality to cut costs and maintain profitability.

Economists often see them as causing market inefficiencies and distortions over time.

It is often implemented to promote fairness in the distribution of goods.

Unintended consequences may arise despite good intentions.

Economists are concerned about the long-term market distortions and inefficiencies created by price ceilings.

A common criticism is that price ceilings lead to market inefficiencies and distortions.