Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

5. Consumer and Producer Surplus; Price Ceilings and Floors

Price Ceilings, Price Floors, and Black Markets

Microeconomics

5. Consumer and Producer Surplus; Price Ceilings and Floors

Price Ceilings, Price Floors, and Black Markets

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Multiple Choice

A price ceiling will have no impact on a market if it is set

below last year's average price

above the equilibrium price

by knowledgeable government officials

below the equilibrium price

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Verified step by step guidance

Understand the concept of a price ceiling: A price ceiling is a government-imposed limit on how high a price can be charged for a product. It is intended to make goods more affordable for consumers.

Identify the equilibrium price: The equilibrium price is the price at which the quantity of goods supplied equals the quantity of goods demanded. It is the point where the supply and demand curves intersect.

Analyze the impact of a price ceiling set above the equilibrium price: If a price ceiling is set above the equilibrium price, it will have no effect on the market because the market price is already below the ceiling. The market will continue to operate at the equilibrium price.

Consider the impact of a price ceiling set below the equilibrium price: If a price ceiling is set below the equilibrium price, it will create a shortage because the quantity demanded will exceed the quantity supplied at that price. This is because suppliers are not willing to sell as much at the lower price.

Conclude that a price ceiling will only impact the market if it is set below the equilibrium price, causing a shortage and potentially leading to non-price rationing mechanisms such as waiting lists or lotteries.