Question

When the government imposes a binding price ceiling on loaves of bread, producers will want to supply (a) bread and consumers will demand (b) bread. therefore, a binding price ceiling will lead to a (c) of bread. the price ceiling will have other effects as well. the size of a loaf of bread and the quality of bread would (d) . although the consumers lucky enough to buy bread would pay a lower price, their opportunity cost of buying bread would (e) . the price ceiling would also cause other changes over time. in the long run, the demand for and supply of bread becomes (f) elastic, leading to a (g) ?

Answer 1

Answer: a) less

b). more

c). Shortage

d). Decrease

e). Increase

f). more

g). larger shortage

Explanation:

At a binding price ceiling demand for the good is greater than its supply. This leads to a shortage of the good. The consumers do not get all they want at the on going price. This makes sellers reduce the size and quality of the load of bread. The shortage also increases the opportunity cost of buying bread. In the long-run demand and supply of bread will become more elastic leading to a larger shortage of bread.