Refer to Figure 6-2. The price ceiling causes quantity supplied to:

• A. equal the quantity demanded, resulting in market equilibrium
• B. fall below the quantity demanded, resulting in a shortage
• C. rise above the equilibrium quantity, resulting in a surplus
• D. remain unchanged from the equilibrium quantity

Answer: (B)

Verified step by step guidance

1. Step 1: Understand what a price ceiling is. A price ceiling is a legal maximum price set below the equilibrium price, intended to make goods more affordable but can lead to market distortions.
2. Step 2: Recall that at the equilibrium price, quantity supplied equals quantity demanded. When a price ceiling is imposed below this equilibrium, the price cannot rise to clear the market.
3. Step 3: Analyze the effect on quantity supplied. Since producers receive a lower price due to the ceiling, they are less willing to supply the good, so quantity supplied decreases.
4. Step 4: Analyze the effect on quantity demanded. Because the price is lower, consumers want to buy more, so quantity demanded increases.
5. Step 5: Conclude that with quantity demanded exceeding quantity supplied, a shortage occurs in the market, meaning the quantity supplied falls below the quantity demanded.