Suppose you live in a community with no price controls.What do you expect will happen if your town borders a community where there is a non-binding price ceiling on most products?
A) Legal market prices will rise in the community with a binding price ceiling.
B) Legal market prices will fall in the community with a binding price ceiling.
C) The price and the quantity sold in the community without a non-binding price ceiling will be the same as the price and quantity in the community with a non-binding price ceiling.
D) There will be more shortages in the community with a binding price ceiling.
E) The black market in the community with a binding price ceiling will not be strong because consumers will simply purchase the product in the community that has no price ceiling.

Question

Quizplus · Accepted Answer

A non-binding price ceiling does not affect the market equilibrium, so prices and quantities remain unchanged in both communities.

Suppose You Live in a Community with No Price Controls