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) a decrease in the amount of excess demand.
D) no change in the excess supply or demand for the product.
E) an increase in the amount of excess supply.

Question

Quizplus · Accepted Answer

If the demand for the product increases with a binding price ceiling in effect, it means that the quantity demanded exceeds the quantity supplied even more than before. This results in an increase in the amount of excess demand, as consumers are willing to buy more at the capped price but suppliers are unable or unwilling to produce enough to meet that demand.

If a Binding Price Ceiling Is in Effect and If