To say that a price ceiling is binding is to say that the price ceiling

Question

Quizplus · Accepted Answer

A price ceiling is said to be binding when it is set below the equilibrium price. This creates excess demand as consumers are willing to buy more at the lower price, but suppliers are not willing to produce as much at the reduced price. As a result, shortages arise leading to dissatisfaction among consumers. Therefore, option C is the correct answer. Options A and B are not correct because a price ceiling can be non-binding if it is set above the equilibrium price and does not result in scarcity.

To Say That a Price Ceiling Is Binding Is to Say