Posted by Lacy on .
Consider Good E, which, when sold in a particular country, has an equilibrium price = $10.00.
The government of that country decided that it doesn’t like that equilibrium price, and so passes a law which prevents the product from selling for $10.00.
After the passage of the law, quantity demanded for Good E= 100,000, while quantity supplied = 130,000.
Did the government enact a price ceiling or a price floor? Draw a graph to explain your answer.
ceiling as price ceilings generally create surpluses