If a binding price ceiling is in effect and if the demand for the product increases,one consequence would be
A)a decrease in the amount of excess supply.
B)a decrease in the amount of excess demand.
C)an increase in the amount of excess supply.
D)an increase in the amount of excess demand.
E)no change in the excess supply or demand for the product.

Question

Quizplus · Accepted Answer

When a binding price ceiling is in effect, it sets a maximum price that is below the market equilibrium price. If demand for the product increases, buyers are willing to pay more than the binding price ceiling allows, resulting in excess demand. This excess demand will cause shortages or stockouts, where buyers will be unable to purchase the product at the set price. Therefore, there will be an increase in the amount of excess demand.

If a Binding Price Ceiling Is in Effect and If