A price ceiling set below the equilibrium price is binding.

Binding

A term used to describe an agreement, rule, or law that is legally or contractually enforceable, requiring adherence by the parties involved.

Equilibrium Price

The cost at which the amount of a product available matches the amount of the product desired.

Evaluate the distinction and consequences of binding in contrast to nonbinding price controls.

Verified Answer

Final Answer :

True

Explanation :

A price ceiling set below the equilibrium price is binding because it restricts the price from reaching the equilibrium level, causing a shortage.

Learning Objectives

Evaluate the distinction and consequences of binding in contrast to nonbinding price controls.