Government Policies

Question 1

What happens if a price ceiling is set below equilibrium price

Answer 1

The maximum amount supplied and demanded is limited
It must be below in order to be effective

Question 2

What happens if a price ceiling is set above equilibrium price

Answer 2

Nothing will happen

Question 3

What will happen in the long and short run if a lower price ceiling is set on rent

Answer 3

Short run - supply wont change as there will not be time to react
Long run - property owners will have time to react to price changes and some will leave the market thus reducing supply