What may happen when a price ceiling is set below market equilibrium?

When a price ceiling is set below the market equilibrium, it leads to the occurrence of shortages of goods. A price ceiling is a legal maximum price that can be charged for a good or service, and is often implemented to protect consumers from excessively high prices.

When the price ceiling is below the equilibrium price, suppliers may find that the price they can charge is not sufficient to cover their costs or to incentivize them to produce the same quantity of goods. As a result, the quantity supplied decreases because producers may reduce output or exit the market. Meanwhile, consumers are encouraged to demand more of the product at the lower price, leading to an increase in quantity demanded.

This imbalance between the reduced quantity supplied and the increased quantity demanded results in shortages. Consumers may find it difficult to purchase the product because there is not enough available at the controlled price, which can lead to long lines or waitlists for the goods.

Thus, when a price ceiling is set below market equilibrium, it disrupts the natural balance of supply and demand, ultimately causing shortages in the market.