Question

Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling, the
A. demand curve for physicals shifts to the right. B. supply curve for physicals shifts to the left.
C. quantity demanded of physicals increases, and the quantity supplied of physicals decreases.
D. number of physicals performed stays the same.

Answer 1

Answer:

The answer is: C) quantity demanded of physicals increases, and the quantity supplied of physicals decreases.

Explanation:

Every time a price ceiling is set below the equilibrium price, the quantity supplied for that product or service will decrease. Also, the quantity demanded for that product or service will increase.

In this case, the demand for physical examinations will increase since they will be "cheaper" than normal, but the doctors will not be willing to perform that many physical examinations because they aren't paid enough.

Answer 2

Answer:

C. quantity demanded of physicals increases, and the quantity supplied of physicals decreases.

Explanation:

The price ceiling is a price that is set to avoid that it will go over a certain level. When this price ceiling is set below the equilibrium price as in this case, the quantity demanded will increase as more consumers will be willing to buy the physicals and the quantity will decrease as suppliers will put less output on the market at a lower price.