If a good is subject to a binding price ceiling and Anna purchases it on the black market,what can she expect to happen to the availability of the good over time?
A) The availability of the good will rise over time as the supply curve becomes more elastic and the demand curve becomes more inelastic.(The shortage of the good will fall. )
B) The availability of the good will fall over time as both the supply and demand curves become more elastic.(The shortage of the good will fall. )
C) The availability of the good will fall over time as both the supply and demand curves become more elastic.(The shortage of the good will rise. )
D) The availability of the good will rise over time as the demand curve becomes more elastic and the supply curve becomes more inelastic.(The shortage of the good will fall. )
E) The availability of the good will not change over time.

Question

Quizplus · Accepted Answer

A binding price ceiling leads to a shortage of the good because the quantity demanded exceeds the quantity supplied at the regulated price. Anna purchasing the good on the black market does not change the underlying imbalance between supply and demand caused by the price ceiling. As a result, the shortage of the good will persist and could potentially get worse over time as sellers are discouraged from producing or selling the good due to the artificially low price. Both the supply and demand curves become more elastic because buyers and sellers have more incentive to adjust their behavior in response to the price ceiling, leading to further reductions in both the quantity supplied and demanded.

If a Good Is Subject to a Binding Price Ceiling