If quantity supplied equals 80 units and quantity demanded equals 85 units under a price control, then it is a:
A) binding price ceiling.
B) binding price floor.
C) nonbinding price ceiling.
D) nonbinding price floor.

Question

Quizplus · Accepted Answer

A binding price ceiling occurs when the government sets a maximum price below the equilibrium price, causing quantity demanded to exceed quantity supplied. In this case, quantity supplied is less than quantity demanded, indicating that the price ceiling is causing a shortage in the market. Therefore, it is a binding price ceiling.

If Quantity Supplied Equals 80 Units and Quantity Demanded Equals