An example of a binding price ceiling is ________ the equilibrium price.
A) a minimum wage law that is set above
B) rent control that is set above
C) a black market that sets the price below
D) a minimum wage law that is set below
E) rent control that is set below

Question

Quizplus · Accepted Answer

A binding price ceiling is a legal maximum price set by the government below the equilibrium price. Rent control that is set below the equilibrium price is an example of a binding price ceiling. It creates a shortage of housing units because the quantity demanded exceeds the quantity supplied at the controlled (lower) price. Therefore, only those who are lucky enough to get a rent-controlled apartment can benefit from the lower price, while others are left out in the cold.

An Example of a Binding Price Ceiling Is ________ the Equilibrium