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Question 11The market for apples is in equilibrium at a price of $0.50 per pound. If the government imposes a price ceiling in the market at a price of $0.40 per pound, then:1 pointquantity demanded will decrease.the price ceiling will not affect the market price or output.there will be a shortage of the good.quantity supplied will increase.

Question

Question 11The market for apples is in equilibrium at a price of 0.50perpound.Ifthegovernmentimposesapriceceilinginthemarketatapriceof0.50 per pound. If the government imposes a price ceiling in the market at a price of 0.40 per pound, then:1 pointquantity demanded will decrease.the price ceiling will not affect the market price or output.there will be a shortage of the good.quantity supplied will increase.

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Solution

There will be a shortage of the good.

Here's why:

  1. The market is initially in equilibrium at a price of $0.50 per pound. This means that the quantity of apples demanded by consumers equals the quantity of apples supplied by producers.

  2. When the government imposes a price ceiling of $0.40 per pound, it means that apples cannot be sold for more than this price.

  3. At this lower price, consumers will want to buy more apples (because they are cheaper), so the quantity demanded will increase.

  4. However, producers will not want to supply as many apples (because they are getting less money for each one), so the quantity supplied will decrease.

  5. The result is a shortage of apples: the quantity demanded exceeds the quantity supplied.

This problem has been solved

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