A price ceiling is most likely to lead to a reduction in the volume of transactions as we move down the supply curve, below the equilibrium price, to the price ceiling. True or false
True
True.
True. A price ceiling is a government-imposed maximum price that can be charged for a good or service. It is usually set below the equilibrium price, which is the price at which quantity demanded equals quantity supplied in a free market.
When the price ceiling is set below the equilibrium price, it creates a shortage of the good or service because the quantity demanded exceeds the quantity supplied. This shortage leads to a reduction in the volume of transactions as we move down the supply curve to the price ceiling.
At prices below the equilibrium, producers are willing to supply less of the good or service due to the constraint imposed by the price ceiling. Meanwhile, consumers are willing to demand more of the good or service at the lower price, resulting in excess demand or a shortage.
Overall, the price ceiling reduces the quantity of transactions and can lead to supply shortages in the market.