Answer
With reference to the diagram, a price ceiling on legal tickets would result in a shortage of Qd-Qs, as at a price lower than that printed on the ticket, which would be assumed to be that of the equilibrium price of P1, the quantity demanded by consumers for the ticket would be higher than the quantity supplied by the producer. Since it is illegal for producers to sell above Pc, the supply for illegal tickets would be much lower than the supply for legal tickets, as can be seen from the diagram for illegal tickets, as the supply curve is further leftward then that of the diagram for legal tickets. Thus, for the same demand by consumers (demand is the same as it is legal for consumers to buy at any price, and there is no incentive for them to purchase less in an illegal market), the equilibrium price would be higher at P0, with the equilibrium quantity at Q0
Work Step by Step
N/A
