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Draw a diagram showing a price ceiling that is binding. On your diagram, clearly label the shortage that the price ceiling causes. Please provide a written explanation for this shortage. Also, shade-in the area which represents consumer surplus when the price ceiling is in place.
Use the diagram to answer the following questions from (a-c).
Ā
a)At the initial equilibrium price, which area represents consumer surplus? Which area represents the producer surplus?
b)After the price ceiling is imposed, which area represents consumer surplus? Which area represents the producer surplus?
c)Which area represents the deadweight loss cost of the price ceiling?
In case of price ceiling, consumer surplus rises