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Question: A price ceiling set above the equilibrium market price will result in:
A, Market failure
B, Excess supply over demand
C, Market equilibrium
D, Excess demand over supply
why not the answer B?
(because I think that: A price ceiling set above the equilibrium market price ==> minimum prices ==> excess supply over demand)?
May you explain to me?
Say that without the price ceiling the equilibrium price is €20 per unit. This is where the buyer and seller both volunteer to operate so that demand = supply.
A price ceiling of €25 is then set. That will make no diference to the buyers’ and sellers’ original decision.