The imposition of a binding price ceiling on a market often results in:
A)an increase in investment in the industry.
B)a surplus.
C)a shortage.
D)a decrease in discrimination on the part of sellers.

Question

The imposition of a binding price ceiling on a market often results in:
A)​an increase in investment in the industry.
B)​a surplus.
C)​a shortage.
D)​a decrease in discrimination on the part of sellers.

Quizplus · Accepted Answer

When a binding price ceiling is imposed, it sets a legal maximum price that sellers can charge, which could be lower than the equilibrium price. This lower price will encourage more buyers to enter the market, while at the same time discourage some sellers from offering their goods or services. The result will be an excess of demand over supply, which is commonly called a shortage. This shortage can create problems in the market, such as long waiting lines or rationing, as buyers compete for the limited supply available at the capped price.

The Imposition of a Binding Price Ceiling on a Market