Question 5 — A vaccine price ceiling - Questions at the end of the chapter - Chapter 9 - The Price Puzzle: What Drives the Market

Last updated at October 5, 2026 by

Suppose the government sets a maximum sale price for an essential vaccine below the market-driven price. What is likely to happen? Choose from: a. Surplus, b. Shortage, c. No effect, d. Fall in demand.

Concept Limitations of Government Intervention
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Answer: (b) Shortage

  • The maximum price is a price ceiling set below the equilibrium price. At this lower price, more people want the vaccine, so quantity demanded rises, while makers earn less, so they supply less.
  • Demand is more than supply, so there is a shortage .
  • Why not the other options? (a) A surplus happens when the price is set above equilibrium, not below. (c) A ceiling below the market price does change the market. (d) A lower price raises quantity demanded; it does not reduce it.
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