Question

When a price ceiling is set below the equilibrium price,

A) the demand curve shifts leftward.
B) the quantity supplied exceeds the quantity demanded.
C) the quantity supplied equals the quantity demanded.
D) the supply curve shifts rightward.
E) the quantity demanded exceeds the quantity supplied.

Answer 1

A price ceiling set below the equilibrium price does not shift demand or supply curves but results in a shortage because the quantity demanded exceeds the quantity supplied.

Step-by-step explanation:

When a price ceiling is set below the equilibrium price, it does not cause a shift in the demand curve or the supply curve. Instead, setting a price ceiling below the equilibrium results in a situation where the quantity demanded on the demand curve is greater than the quantity supplied on the supply curve. This leads to excess demand, or a shortage, because at the price ceiling, more people are willing to buy the good than what is available at that price.

Therefore, the correct answer to the question is E) the quantity demanded exceeds the quantity supplied.