The quantity traded with a binding price ceiling is lower than the quantity traded without a price ceiling, which means that price ceilings create lost gains from trade.

Question

Quizplus · Accepted Answer

Price ceilings create a shortage of the good or service in question because suppliers are not willing to provide as much at a lower price. This leads to a decrease in the quantity traded, and as a result, lost gains from trade as some potential trades that would have been beneficial for both parties cannot occur.

The Quantity Traded with a Binding Price Ceiling Is Lower