A price ceiling that is set below the equilibrium price
A)causes suppliers to raise their prices.
B)is binding.
C)is non-binding.
D)creates a surplus.

Question

Quizplus · Accepted Answer

A price ceiling that is set below the equilibrium price is binding, meaning that it creates a shortage of the good or service. This is because at the lower price, a larger quantity of the good or service is demanded than is supplied, leading to excess demand. Therefore, the price ceiling is effective at keeping prices lower than they would be in a free market, but it comes at the cost of shortages and potential black markets for the good or service.

A Price Ceiling That Is Set Below the Equilibrium Price