The price paid by buyers in a market will increase if the government
(i)increases a binding price floor in that market.
(ii)increases a binding price ceiling in that market.
(iii)decreases a tax on the good sold in that market.

Question

Quizplus · Accepted Answer

Increasing a binding price floor will raise the minimum price buyers must pay. Increasing a binding price ceiling will also raise the price if it was previously below the equilibrium price. Decreasing a tax on the good would typically lower the price paid by buyers.

The Price Paid by Buyers in a Market Will Increase