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Refer to Exhibit 4-3. Suppose that the government imposes a price ceiling at a price of $12. The result would be a ________________ of _____________ units of good Z.

Sagot :

Answer:

The correct option is c. shortage, 70. That is, the result would be a shortage of 70 units of good Z.

Explanation:

Note: This question is not complete. The complete question is therefore provided before answering the question as follows:

Exhibit 4-3

PRICE OF GOOD Z:

$10 // QD: 300 // QS: 160

$12 // QD: 250 // QS: 180

$14 // QD: 200 // QS: 200

$16 // QD: 150 // QS: 220

Refer to Exhibit 4-3. Suppose that the government imposes a price ceiling at a price of $12. The result would be a ________________ of _____________ units of good Z.

a. surplus, 70

b. surplus, 20

c. shortage, 70

d. shortage, 20

The explanation of the answers is now provided as follows:

A price ceiling can be described as a maximum price set by the government whereby it is illegal to sell the good above it. A price ceiling will cause a product shortage if it is set below the product's equilibrium price.

Equilibrium price is the price at which quantity demanded (QD) is equal to the quantity supplied (QS).

From Exhibit 4-3, QD is equal to QS is equal to 200 at the price of $14. This implies that the ceiling price of $12 imposed by the government is below the equilibrium price.

Based Exhibit 4-3. the units of shortage of goods Z at $12 can be calculated as follows:

Units of shortage of goods Z at the price of $12 = QD at the price of $12 – QS at the price of $12 = 250 - 180 = 70 units

Therefore, the correct option is c. shortage, 70. That is, the result would be a shortage of 70 units of good Z.