When a price ceiling is binding, the goods that are on sale are allocated to buyers using a method:
A) of random allocation.
B) whereby the highest bidder wins.
C) whereby the lowest bidder wins.
D) whereby buyers purchase lottery tickets to see who will be able to buy the product.

Question

Quizplus · Accepted Answer

When a price ceiling is binding, the price of the good cannot go above the set price ceiling. This creates excess demand or a shortage of the good. In this case, goods are allocated to buyers through a method of random allocation, such as a lottery system, where all buyers have an equal chance of obtaining the good. This is done to prevent discrimination in favor of certain buyers who may have more resources or influence to obtain the good through other means.

When a Price Ceiling Is Binding, the Goods That Are