The question requires us to determine the result of the
Explanation of Solution
At the
Equilibrium rent = $500 per month
The
The government sets the price ceiling at $600 which is above the equilibrium price. When the government sets the price ceiling above the equilibrium price, it will not have any effect on the demand and supply of rental apartments.
Since equilibrium rent is $500 per month, it means consumers are willing to buy the apartments on rent at $500 per month and sellers are ready to give their apartments on rent at $500. If the government sets the price above it, the ceiling won’t be binding, and thus it will have no effect.
Therefore, there will be no shortage or surplus when a government sets a price ceiling above the equilibrium price because both the buyers and the sellers are happy at the equilibrium rent.
The option “c” is correct.
The price ceiling is the price set by the government to regulate the market. It is the maximum price a seller can charge for the goods and services. Generally, the price ceiling lies below the
Chapter 2R Solutions
Krugman's Economics For The Ap® Course
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