Price Controls and Market Imbalances

Steps:

• Identify market equilibrium as the price where supply equals demand, resulting in no shortage or surplus.
• Analyze price below equilibrium: demand exceeds supply, creating a shortage of the product.
• Analyze price above equilibrium: supply exceeds demand, creating a surplus of the product.
• Evaluate choices for terms matching shortage (below) and surplus (above): only C fits with "shortage" first and "surplus" second.

Why C is correct:

• The law of supply and demand states that a price below equilibrium causes a shortage (demand > supply), while above causes a surplus (supply > demand); "minimum shortage" and "maximum surplus" describe the resulting imbalances relative to equilibrium's zero.

Why the others are wrong:

• A: Both use "surplus," but below equilibrium causes shortage, not surplus.
• B: Starts with "surplus" for below (wrong) and "shortage" for above (wrong).
• D: Uses "surplus" for below (wrong) and "shortage" for above (wrong).

Final answer: C