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Assume the market is initially in equilibrium at point A. Then assume the city imposes a price ceiling of pz


Consider the market for apartments in New York City illustrated in the figure below. Assume the market is initially in equilibrium at point A. Then assume the city imposes a price ceiling of pz. How does this affect the market? 

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The price ceiling results in a shortage of apartments 

The price ceiling results in an equilibrium where supply equals demand. 

The price ceiling is not binding and has no effect 

The price ceiling results in a surplus of apartments

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Answer #1

ANSWER:

When ceiling of p2 is imposed then the demand at p2 is more then the supply at p2 and hence there will be shortage of apartments and hence option a is the right answer.

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