In which case would the shortage resulting from a price ceiling be greater: when

Question

In which case would the shortage resulting from a price ceiling be greater: when supply is inelastic or elastic? Explain your answer.

a.

Inelastic. The reason is that the response in quantity supplied is greater when producers are not greatly affected by changes in price.

b.

Elastic. The reason is that the response in quantity supplied is greater when price elasticity is greater.

c.

d.

a.

Inelastic. The reason is that the response in quantity supplied is greater when producers are not greatly affected by changes in price.

Explanation / Answer

b.Elastic. The reason is that the response in quantity supplied is greater when price elasticity is greater.

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