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Chapter 4: Q12 (page 104)

Select the correct answer. A price ceiling will usually shift:

a. demand

b. supply

c. both

d. neither

Short Answer

Expert verified

Price Ceiling shifts neither demand nor supply curve.

Step by step solution

01

Price Ceiling Concept 

Price Ceiling is the maximum mandated price of a commodity, fixed by regulatory body, to protect the interests of buyers and prevent them from being exploited.

Example : Maximum fixed price of medicines

02

Detailed Explanation 

Price Ceiling is just an imposed price, lower than the equilibrium price - ie where demand & supply curves intersect.

It doesn't shift either demand or supply curve, just fixes a price below their intersection point. A change in the price can cause movement along the existing demand and supply curves, but not a shift.

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Most popular questions from this chapter

Which of the following changes in the financial market will lead to a decline in interest rates:

a) rise in demand

b) fall in demand

c) rise in supply

d) fall in supply

Select the correct answer. A price floor will usually shift:

a. demand

b. supply

c. both

d. neither

Illustrate your answer with a diagram.

Would usury laws help or hinder resolution of a shortage in financial markets?

If a usury law limits interest rates to no more than 35%, what would the likely impact be on the amount of loans made and interest rates paid?

How do economists define equilibrium in financial

markets?
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