Question

To the extent that a governmental price control succeeds in affecting price, it can be expected to lead to a corresponding:

Answer 1

Answer:

d. ​reduction in the volume of sales if the price is forced down and an increase in the volume of sales if the price is forced up.

Explanation:

When government implements price controls it can either be a price ceiling ( reduced price) or a price floor (increased price).

A price ceiling gives a maximum price level above which sellers cannot sell their product. This will cause a reduction in amount supplied because the sale of products at lower price will not be attractive. Demand will be in excess for the scarce products.

If a price floor is imposed there is a minimum price that sellers are not allowed to sell below. Sellers are free to sell above this price, supply will increase but there will be less demand for the product at higher price. This causes excess of supply.