Answer to Question #293801 in Microeconomics for Agyei Prince

Question

What are the consequences of the imposition of price ceiling.

Answer 1

Solution:

A price ceiling is a kind of price control, or limit imposed by the government on how high a price is charged for a product, or service. Price ceilings prevent a price from rising above a particular level.

The consequences of imposing a price ceiling are as follows:

When a price ceiling is set below the equilibrium price, the quantity demanded will exceed the quantity supplied, and an excess demand or shortage will arise.

Price ceilings tend to cause shortages, extra charges, or poor quality of products or services offered, including causing deadweight loss to an economy, making it more inefficient.