on this graph, what does the green arrow represent?○ an ineffective price floor set above equilibrium…

on this graph, what does the green arrow represent?○ an ineffective price floor set above equilibrium causing a surplus.○ an effective price floor set below equilibrium causing a shortage.○ an ineffective price ceiling set above equilibrium causing a surplus.○ an effective price ceiling set below equilibrium causing a shortage.

on this graph, what does the green arrow represent?○ an ineffective price floor set above equilibrium causing a surplus.○ an effective price floor set below equilibrium causing a shortage.○ an ineffective price ceiling set above equilibrium causing a surplus.○ an effective price ceiling set below equilibrium causing a shortage.

Answer

Brief Explanations:

  1. First, identify the price control: PC1 is below the equilibrium price PE, which is characteristic of a price ceiling (a maximum legal price).
  2. A price ceiling is effective when set below equilibrium, as it restricts the market from reaching the natural equilibrium.
  3. At price PC1, the quantity demanded (rightmost quantity) is greater than the quantity supplied (leftmost quantity), creating a shortage, labeled "Excess Demand" on the graph.
  4. Match this to the options: this describes an effective price ceiling set below equilibrium causing a shortage.

Answer:

an effective price ceiling set below equilibrium causing a shortage.