Day care for children is a competitive industry in long-run equilibrium at a price of $60 per day. In an effort to make day care more affordable for a larger number of families, the government passes a law that limits the amount day care providers can charge to $45 per day. As a result of this price ceiling,

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1 January, 07:24

Day care for children is a competitive industry in long-run equilibrium at a price of $60 per day. In an effort to make day care more affordable for a larger number of families, the government passes a law that limits the amount day care providers can charge to $45 per day. As a result of this price ceiling,

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Sadie Rodgers · Answer 1

Since the price ceiling has been set below equilibrium level, the quantity demanded for child day care services will exceed the quantity supplied. This means that it will be more difficult for parents to find day care service providers for their children.

Price ceilings or price floors cause deadweight losses which represent a net loss of both consumer and producer surplus