demand curve; (4) compare the new equilibrium price and quantity to the original ones.

3.4 Price Ceilings and Price Floors

Price ceilings prevent a price from rising above a certain level. When a price ceiling is set below the

equilibrium price, quantity demanded will exceed quantity supplied, and excess demand or shortages will

result. Price floors prevent a price from falling below a certain level. When a price floor is set above the

equilibrium price, quantity supplied will exceed quantity demanded, and excess supply or surpluses will

result. Price floors and price ceilings often lead to unintended consequences.
80 3 • Self-Check Questions

3.5 Demand, Supply, and Efficiency

Consumer surplus is the gap between the price that consumers are willing to pay, based on their preferences,

and the market equilibrium price. Producer surplus is the gap between the price for which producers are
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