Asked by Janice Walker on Jun 11, 2024
Verified
A binding price ceiling will cause a persistent _____,and a binding price floor will cause a persistent _____.
A) surplus;surplus
B) shortage;surplus
C) shortage;shortage
D) surplus;shortage
Binding Price Ceiling
A government-imposed price limit that is set below the equilibrium price, causing a shortage of the product because demand exceeds supply.
Binding Price Floor
A government-imposed price control or limit that sets the lowest price at which a good can be sold, which is above the market equilibrium price, leading to excess supply.
Persistent Surplus
A situation where the supply of a good consistently exceeds the demand for it, often leading to a drop in prices.
- Differentiate between enforceable and unenforceable price limits and their impact on market behavior.
Verified Answer
MB
mitchell berkeleyJun 12, 2024
Final Answer :
B
Explanation :
A binding price ceiling, set below the equilibrium price, causes a shortage because the quantity demanded exceeds the quantity supplied. A binding price floor, set above the equilibrium price, causes a surplus because the quantity supplied exceeds the quantity demanded.
Learning Objectives
- Differentiate between enforceable and unenforceable price limits and their impact on market behavior.