Using a price ceiling diagram, analyse the impact a maximum price might have on the market for food.

A maximum price is a price set below the market equilibrium by the government which firms are not allowed to exceed. This can result in creating disequilibrium in the market resulting in excess demand. In the market for food, this can create many impacts such as protecting low income consumers but also some consumers will lose out on buying the food.Fig.1 shows how the imposition of a maximum price can affect the market for food. [...] Due to the imposition of a maximum price, Pmax, the market is no longer in equilibrium and there is a disequilibrium at Q2 where Max price = D. As a result, there is excess demand of Qd – Qs. The effect on consumers, producers and society is...Some impacts of a maximum price are:Protects low income consumersReduced income for producersExcess demand so some consumers miss out on consuming the good