Figure 6-5

-Refer to Figure 6-5.In this market,which of the following price controls would be binding?

Question

Figure 6-5
 
-Refer to Figure 6-5.In this market,which of the following price controls would be binding?

Quizplus · Accepted Answer

A price ceiling of $2.00 would be binding because it is below the equilibrium price of $4.00. This would cause a shortage, as the quantity demanded would exceed the quantity supplied at that price. A price ceiling of $5.00 would not be binding because it is above the equilibrium price and would have no effect on the market. A price floor of $2.00 would also not be binding because it is below the equilibrium price, and the market would naturally reach the equilibrium price without any intervention.

Figure 6-5 -Refer to Figure 6-5.In This Market,which of the Following Price