Question

The following graph shows the initial market for plywood in a coastal Florida town. A hurricane has been spotted headed directly toward the town. The residents know that the best way to protect their homes is to board up all of their windows. Governor of Florida has declared that plywood prices cannot exceed the initial price of $25. What is the most likely outcome of the price control?

There will be no shortage or surplus - people will be able to obtain the plywood that they need to board up their windows. There will be a surplus of plywood. There will be a shortage of plywood. Quantity supplied will increase to meet new demand.

Answer 1

Actually no graph has been attached on surfing internet I found this graph which was used for same question. Refer the attached picture below

Here the equilibrium price is equal to $ 25 and when the government imposes a price floor at the equilibrium price then there will be no shortage or surplus.

As per the above graph there will be no shortage or surplus.

When the price floor is set above the equilibrium price then the price control will be binding then there will be surplus in the market.

When price floor is set below the equilibrium price then price control is non binding.

Now, as per your graph you can decide the answer. Please contact through comments with the equilibrium price that is the price where demand and supply are equal. Please help me. Thank you.