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At the lower price, the quantity supplied by producers decreases along the supply curve to Q , while the quantity demanded by consumers increases along the demand curve to Q,.    A shortage ~(e,- Q,) of the good will result because the quantity demanded by consumers exceeds the quantity supplied by producers at the new controlled price. After the price ceiling is imposed, the quantity of the good exchanged declines from the equilibrium quantity to Qs, and the gains from trade (consumer and producer surplus) fall as well. Normally, a higher price would ration the good to the buyers most willing to pay for it. Because the price ceiling keeps this from happening, though, other means must be used to allocate the smaller quantity Q, among consumers wanting to purchase Q,.    Predictably, nonprice factors will become more important in the rationing process. Sellers will be forced to discriminate on some basis other than willingness to pay as they ration their sales to eager buyers. They will be more inclined to sell their products to their friends, to buyers who do them favors, and even buyers willing to make illegal “under-the-table” payments. (The accompanying Applications in Economics box, “The Imposition of Price Ceilings During Hurricane Hugo,” highlights this point.) Time might also be used as the rationing device, with those willing to wait in line the longest being the ones able to purchase the good. In addition, the below-equilibrium price reduces the incentive of sellers to expand the future supply of the good. At the lower price, suppliers will direct resources away from production of the good and into other, more profitable areas. As a result, the product shortage will worsen through time.
What other secondary effects can be expected? In the real world, there are two ways that sellers can raise prices. First, they can raise their money price, holding quality constant. Or, second, they can hold the money price constant while reducing the quality of the good. (The latter might also include reducing the size of the product, say, for example, a candy bar or a loaf of bread.) Faced with a price ceiling, sellers will use quality reductions as a way to raise their prices. Because of the government-created shortage, many consumers will buy the lower quality good rather than do without it.
It is important to note that a shortage is not the same as scarcity. Scarcity is inescapable. Scarcity exists whenever people want more of a good than nature has provided. This means, of course, that almost everything of value is scarce. Shortages, on the other hand, are a result of prices being set below their equilibrium values prices are permitted to rise. Removing the price ceiling will allow the price to rise back to its equilibrium level. This will stimulate additional production, discourage consumption, and increase the incentive of entrepreneurs to search for and develop substitute goods. This combination of forces will eliminate the shortage.