Recently the local government in Shanghai has introduced a price ceiling for the sale of apartments to deal with the huge increase in prices over the last few years.Apartments that could sell in the market for 130,000 yuan (US$19,400) per square metre, now have to be sold at a price about 30 per cent lower, that is, at a price of 100,000 yuan per square metre to meet the government requirement.

What effect is this likely to have on the market for apartments in Shanghai?What will happen to the quantity of apartments demanded?What will happen to the quantity supplied?Who gains?Who loses? Draw a diagram to support your answer