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Earn +20 ptsQ: Why do price ceilings have to be below equilibrium?
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What do economists mean when they say that price floors and ceilings stifle the rationing function of prices and distort resource allocation?
When economist says price floors means above equilibrium and leads to undermanned surplus. When they say price ceilings it means price below equilibrium which leads to unsupplied shortage.
A shortage will develop when?
The market price is below the equilibrium price.
When a surplus of a product will arise when price is above equilibrium or below equilibrium?
above equilibrium
Where is the price ceiling located on a graph depicting market equilibrium?
The price ceiling is located below the equilibrium price on a graph depicting market equilibrium.
What is a maximum price set below the equilibrium price?
Price Floor.
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