ECS1501 ASSIGNMENT 03 SEMESTER 02

ECS1501 ASSIGNMENT 03 SEMESTER 02 ECS1501 3.1 When a price ceiling is imposed in a market [1] a persistent shortage is created. [2] a persistent surplus is created. [3] sellers of the product are made better off. [4] quantity supplied is greater than the quantity demanded. Explanation: The easiest way to answer this question is to draw a diagram of a market and apply the different options to it. From the diagram one can see that if a price ceiling of R2 500 is imposed, quantity demanded is 18 000 and quantity supplied is 12 000. Quantity demanded is more than quantity supplied, that is a shortage is created. Because sellers cannot raise the price (it would be illegal), they will not produce more and the shortage is therefore persisten