If a price ceiling of $2 per litre is imposed on gasoline,but the market equilibrium price is $1.50,the price ceiling is a binding constraint on the market.

Name: If a price ceiling of $2 per litre is imposed on gasoline,but the market equilibrium price is $1.50,the price ceiling is a binding constraint on the market.
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Question

Quizplus · Accepted Answer

A price ceiling is only binding if it is set below the market equilibrium price, causing a shortage. Since $2 is above the equilibrium price of $1.50, it is not binding.

If a Price Ceiling of $2 Per Litre Is Imposed