When the government imposes a binding price ceiling on a competitive market, a surplus of the good arises, and sellers must ration the scarce goods among the large number of potential buyers.

Question

Quizplus · Accepted Answer

A binding price ceiling in a competitive market typically leads to a shortage, not a surplus, because the price is set below the equilibrium price, leading to higher demand and lower supply.

When the Government Imposes a Binding Price Ceiling on a Competitive