Price ceilings are designed to benefit which of the following groups?

• A. Consumers by keeping prices below the equilibrium level
• B. Producers by allowing them to charge higher prices
• C. The government by increasing tax revenue
• D. Exporters by making domestic goods more competitive abroad

Answer: (A)

Verified step by step guidance

1. Understand the concept of a price ceiling: it is a legal maximum price set by the government below the market equilibrium price to make goods more affordable.
2. Recall that the equilibrium price is where the quantity demanded equals the quantity supplied in a free market without intervention.
3. Analyze the effect of a price ceiling being set below the equilibrium price: it lowers the price consumers pay compared to the market equilibrium.
4. Recognize that this lower price benefits consumers because they pay less for the good than they would at equilibrium.
5. Note that producers do not benefit from a price ceiling because they must sell at a lower price, and the government does not directly increase tax revenue from this policy; exporters are also not directly affected in this context.