An increase in supply will do which of the following in a market with an effective price ceiling?Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.aincrease the quantity exchanged in the marketbdecrease the quantity exchanged in the marketcincrease the price
Question
An increase in supply will do which of the following in a market with an effective price ceiling?Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.aincrease the quantity exchanged in the marketbdecrease the quantity exchanged in the marketcincrease the price
Solution
An increase in supply in a market with an effective price ceiling will increase the quantity exchanged in the market. Here's why:
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An effective price ceiling is a government-imposed limit on how high a price can be charged for a product. It is set below the market equilibrium price.
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When the supply increases, it means there are more goods available for sale.
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However, because of the price ceiling, sellers cannot increase the price of the goods even though there's more supply.
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Therefore, to sell the increased supply, sellers will have to exchange more quantity of goods at the same price.
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Hence, the quantity exchanged in the market increases.
So, the correct answer is a) increase the quantity exchanged in the market.
Similar Questions
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