Asked by Michael Petropulos on Jun 19, 2024
Verified
If a price ceiling is binding, then
A) there will be no effect on the market price or quantity sold.
B) there will be a surplus in the market.
C) the market will be more efficient than it would be without the price ceiling.
D) there will be a shortage in the market.
Price Ceiling
A government-imposed limit on how high a price can be charged on a product or service, intended to protect consumers.
Market Price
The amount of money a buyer is willing to pay and a seller is willing to accept for a good or service in a competitive market.
Shortage
A market condition in which the demand for a product or service exceeds its supply, often leading to higher prices.
- Understand the situations leading to an oversupply or insufficiency stemming from the imposition of price controls.
Verified Answer
AJ
Abdulrahman JamalJun 23, 2024
Final Answer :
D
Explanation :
A binding price ceiling is set below the equilibrium price, leading to a situation where the quantity demanded exceeds the quantity supplied, causing a shortage in the market.
Learning Objectives
- Understand the situations leading to an oversupply or insufficiency stemming from the imposition of price controls.