Question

If the government imposes a price ceiling of $90, does a shortage or surplus (or neither) develop?what are the price, quantity supplied, quantitydemanded, and size of the shortage or surplus?

Answer 1

Price ceilings are the highest price that the establishment could sell their products for. In this item, it is given that the maximum price that the establishment could impose is only $90. Price ceilings are developed and are being implemented in order to limit the power of the sellers over products that are very much in demand to the users. 

Hence, for this item, the price will have a maximum value of $90, the quantity supplied are relatively lower while the demand grows more and more. Moreover, shortage of the product will happen due to the increased demands.