Use the figure below to answer the following question(s). Figure 4-4
Given the demand and supply conditions shown in Figure 4-4, what will happen as the result of imposing a price ceiling of a?
A) Demand for the product will decline.
B) Supply will increase.
C) There will be a shortage of the product.
D) Over time, the quality of the product offered by suppliers will increase.

Question

Use the figure below to answer the following question(s). Figure 4-4
 Given the demand and supply conditions shown in Figure 4-4, what will happen as the result of imposing a price ceiling of a?
A) Demand for the product will decline. 
B) Supply will increase. 
C) There will be a shortage of the product. 
D) Over time, the quality of the product offered by suppliers will increase.

Quizplus · Accepted Answer

At price ceiling a, the quantity demanded exceeds the quantity supplied, resulting in a shortage of the product. Therefore, choice C is the correct answer. Choice A is not correct because demand does not decline, but rather exceeds supply. Choice B is not correct because supply does not increase; in fact, suppliers may reduce the quantity supplied at the lower price. Choice D is not correct because the quality of the product is not explicitly related to the price ceiling.

Use the Figure Below to Answer the Following Question(s)