If a binding price ceiling is in effect and if the demand for the product increases,one consequence would be
A)an increase in the amount of excess demand.
B)a decrease in the amount of excess supply.
C)an increase in the amount of excess supply.
D)a decrease in the amount of excess demand.
E)no change in the excess supply or demand for the product.

Question

Quizplus · Accepted Answer

When a binding price ceiling is in effect, the price is set below the market equilibrium price, which creates excess demand (more buyers wanting to buy the product than there are units of the product available). If the demand for the product increases, this excess demand will also increase. Therefore, the correct answer is A) an increase in the amount of excess demand.

If a Binding Price Ceiling Is in Effect and If