Assume a competitive industry faces an increase in demand (that means the curve shifts upward). Describe steps by which a competitive market insures increased output? Does your answer change if the government imposes price ceiling?
If demand rise with fixed supply, price and profits increase. The price rise induces the firms in the industry to raise output. Also, with positive profit, firms enter the industry, shifting the supply curve to the right. Along with an effective price ceiling, profit will be lower than without the ceiling, decreasing the incentive for firms to enter the industry. Along with zero economic profit, no firms enter and there is no shift in the supply curve.