Price Ceiling Causes Shortage in Fixed-Supply Market

Steps:

• Equilibrium price balances supply and demand for electricity.
• Maximum price (ceiling) set below equilibrium reduces quantity supplied, as producers cut back.
• Fixed supply limits additional electricity, while lower price boosts demand from households.
• Resulting excess demand over supply creates shortages.

Why D is correct:

• Price ceiling below equilibrium causes shortage, where quantity demanded exceeds quantity supplied (law of supply and demand).

Why the others are wrong:

• A: Lower prices reduce producer profits, discouraging new power stations.
• B: Ceiling harms all producers equally, not specifically boosting renewables.
• C: Producers receive lower prices, shrinking their surplus.

Final answer: D