If the equilibrium price of corn is \$9 and a price ceiling of \$7 is imposed, which of the following is most likely to occur in the market for corn?

• A. The market remains in equilibrium with no effect on quantity traded
• B. A shortage of corn as quantity demanded exceeds quantity supplied
• C. The price of corn rises above \$9 due to increased demand
• D. A surplus of corn as quantity supplied exceeds quantity demanded

Answer: (B)

Verified step by step guidance

1. Understand the concept of a price ceiling: it is a legally imposed maximum price that sellers can charge for a good, set below the equilibrium price to make the good more affordable.
2. Identify the equilibrium price and the imposed price ceiling: here, the equilibrium price is \$9, and the price ceiling is set at \$7, which is below the equilibrium price.
3. Analyze the effect of the price ceiling being below equilibrium: since sellers cannot charge more than \$7, the quantity supplied will decrease because producers are less willing to supply at a lower price.
4. At the same time, the lower price increases the quantity demanded because consumers want to buy more at the cheaper price.
5. Compare quantity demanded and quantity supplied at the price ceiling: quantity demanded exceeds quantity supplied, leading to a shortage in the market.