A government-imposed price ceiling below the market’s equilibrium price will create an excess demand for the product. True or false: As a result of the excess demand, either the demand curve will shift to the left or the supply curve will shift to the right – or both.Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.aTruebFalse
Question
A government-imposed price ceiling below the market’s equilibrium price will create an excess demand for the product. True or false: As a result of the excess demand, either the demand curve will shift to the left or the supply curve will shift to the right – or both.Selected answer will be automatically saved. For keyboard navigation, press up/down arrow keys to select an answer.aTruebFalse
Solution
bFalse
A government-imposed price ceiling below the market’s equilibrium price will indeed create an excess demand for the product. However, this does not necessarily mean that the demand curve will shift to the left or the supply curve will shift to the right. The demand curve represents the quantity of a good that consumers are willing and able to purchase at various prices, assuming all else is held constant. Similarly, the supply curve represents the quantity of a good that producers are willing and able to sell at various prices, assuming all else is held constant. A shift in either curve would indicate a change in one of these 'all else held constant' factors, not a change in price. Therefore, the statement is false.
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