Figure 6-2

-Refer to Figure 6-2.If the government imposes a binding price ceiling of $8.00 in this market,what is the result

Question

Figure 6-2
 
-Refer to Figure 6-2.If the government imposes a binding price ceiling of $8.00 in this market,what is the result

Quizplus · Accepted Answer

A binding price ceiling of $8.00 means that the price of the good cannot exceed $8.00. As seen in the graph, the equilibrium price is $10.00 and the quantity exchanged at this price is 60 units. At a price of $8.00, however, the quantity demanded increases to 80 units while the quantity supplied decreases to 40 units. This results in a shortage of 20 units (80-40=40), meaning that there are 20 units of demand that are not being met. Therefore, the correct answer is C, a shortage of 20 units.

Figure 6-2 -Refer to Figure 6-2.If the Government Imposes a Binding Price