In the figure provided, a price of Pc has been set by a government price control. Given the associated quantity demanded, Q1 , and quantity supplied, Q2 , which of the following describes the quantity Q2−Q1 ? (1 point) Responses the shortage resulting from the price floor Pc the shortage resulting from the price floor upper p subscript c baseline the surplus resulting from the price floor Pc the surplus resulting from the price floor upper p subscript c baseline the surplus resulting from the price ceiling Pc the surplus resulting from the price ceiling upper p subscript c baseline the shortage resulting from the price ceiling Pc the shortage resulting from the price ceiling upper p subscript c baseline

Question

GPT-4o mini · Answer

To determine what $ Q2 - Q1 $ represents in the context of price controls, let's clarify the terms involved: - **Quantity Demanded (Q1)**: The amount of a product consumers are willing to buy at the controlled price $ Pc $. - **Quantity Supplied (Q2)**: The amount of the product that producers are willing to sell at the controlled price $ Pc $. Now let's analyze the scenarios involving price floors and price ceilings: 1. **Price Floor**: This is a minimum price set above the equilibrium price. It leads to a surplus because the quantity supplied exceeds the quantity demanded at that price. 2. **Price Ceiling**: This is a maximum price set below the equilibrium price. It leads to a shortage because the quantity demanded exceeds the quantity supplied at that price. Given that $ Q2 $ (quantity supplied) is greater than $ Q1 $ (quantity demanded), $ Q2 - Q1 $ represents the difference between what producers want to sell and what consumers want to buy. Since this situation arises when there is a price control that creates a discrepancy between supply and demand, it would be indicative of a surplus. Therefore, if $ Pc $ is set in such a way that $ Q2 > Q1 $, we can conclude that $ Q2 - Q1 $ represents the surplus resulting from the price control. **The most appropriate response is: "the surplus resulting from the price floor $ Pc $"**.