on this graph, what does the green arrow represent? an ineffective price floor set above equilibrium causing…
on this graph, what does the green arrow represent? an ineffective price floor set above equilibrium causing a surplus. an effective price floor set below equilibrium causing a shortage. an ineffective price ceiling set above equilibrium causing a surplus. an effective price ceiling set below equilibrium causing a shortage.
Answer
Brief Explanations:
A price - ceiling is a legal maximum price. When it is set below the equilibrium price (PE), quantity demanded exceeds quantity supplied, creating a shortage. In the graph, the price is held at PC1 which is below PE, and there is excess demand. A price - floor is a legal minimum price. An ineffective price - ceiling (set above equilibrium) or price - floor (set below equilibrium) has no impact on the market equilibrium.
Answer:
an effective price ceiling set below equilibrium causing a shortage.