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

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

Answer: (B)

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 prevents prices from rising to the natural market level, which tends to increase quantity demanded and decrease quantity supplied.
4. Identify who benefits from this intervention: consumers benefit because they pay a lower price than the equilibrium price, while producers typically do not benefit because they receive less revenue per unit and may supply less.
5. Conclude that price ceilings are designed to benefit consumers by keeping prices below the equilibrium level, making goods more affordable for them.