Answer to Question #286284 in Microeconomics for Anshul

Question

Suppose the government imposes a price cap on bottle show the effect in bottled water market

Answer 1

If the price ceiling $P^*$ is set below the equilibrium price P, then there will be a shortage of bottled

water in the amount of $Q_1 − Q_2$ and bottled water will be rationed. If the price ceiling is above

the equilibrium price, then there is no effect