Answer to Question #132216 in Macroeconomics for Yaqui

Question

When the government sets an effective price ceiling

Answer 1

The price ceiling is only effective when set BELOW the equilibrium price whereby, at this point, the quantity demanded (qd) is greater than quantity supplied (qs), which indicates a shortage situation. The amount exchanged in the market will be limited by the smaller of the two quantities (qs in this case).

When a  price ceiling is set, a shortage ocurs. ... For the price  that the ceiling is set at, there is more demand than there is at the equilibrium price .The government puts a legal limit on how high the price of a product can be.