Answer to Question #230965 in Microeconomics for Mavis

Question

Suppose the government enacts legislation that imposes a price ceiling equivalent
to the original equilibrium price. What is the result of this legislation?

Answer 1

In this case, there will be shortages in in the quantity supplied. Producers will consider preserving the durable good until when the price ceiling criteria is ruled out. Furthermore, the legislation will encourage decrease in the sold quantity as the ratio will be minimized.