If the government imposes a price ceiling of $100 on a market, what would happen in the market as a result of protests of price gauging by the sellers? What would happen to the price and quantity in the market?

If the government imposes a price ceiling of $100 on a market and there are protests against price gouging by sellers, it is important to consider the impact on the market equilibrium. A price ceiling is a maximum price set by the government that sellers are allowed to charge for a product or service. In this case, the ceiling is set at $100.

When protests against price gouging occur, it suggests that sellers are charging higher prices than what buyers perceive as fair or reasonable. As a result of these protests, the government may be under pressure to further intervene in the market.

Typically, price ceilings lead to a situation where the market price is held below the equilibrium price. This often results in excess demand or a shortage, as the quantity demanded by buyers exceeds the quantity supplied by sellers at the artificially low price.

In this scenario, the price ceiling set at $100 would likely be below the equilibrium price, causing a shortage in the market. Buyers, aware of the lower price, would demand more goods or services than at the equilibrium price. However, sellers, facing a lower price they can charge, would be unwilling or unable to supply the same quantity as before. This discrepancy between demand and supply leads to a shortage in the market.

To visualize it, imagine a demand and supply graph. The demand curve, representing the quantity buyers are willing and able to purchase at different prices, would be higher than the supply curve, showing the quantity sellers are willing and able to provide at different prices. With a price ceiling of $100, the demand curve would intersect the supply curve at a point where the quantity demanded exceeds the quantity supplied, resulting in a shortage.

In summary, if a price ceiling of $100 is imposed on a market and protests against price gouging occur, it would likely lead to a shortage in the market as the quantity demanded exceeds the quantity supplied at the lower price.