Market demand is given as Q_D= 45 - P.Market supply is given as Q_S= P + 15.Which legally imposed price would constitute a binding price ceiling

Question

Quizplus · Accepted Answer

A binding price ceiling is a legally imposed maximum price that is set below the equilibrium price. To find the binding price ceiling, we need to find the equilibrium price first. At equilibrium, demand equals supply: Q_D = Q_S 45 - P = P + 15 2P = 30 P = 15 Therefore, the equilibrium price is $15. To be a binding price ceiling, the legally imposed maximum price must be below the equilibrium price. According to the options given: A) $9 - this price is below the equilibrium price and would be a binding price ceiling. B) $12 - this price is also below the equilibrium price and would be a binding price ceiling. C) $18 - this price is above the equilibrium price and would not be a binding price ceiling. D) $21 - this price is also above the equilibrium price and would not be a binding price ceiling. Therefore, options A and B are possible choices for a binding price ceiling.

Market Demand Is Given as QD = 45 - P

Market Demand Is Given as Q_D= 45 - P