A binding price ceiling that could be set in the market in the graph shown would be:

Question

Quizplus · Accepted Answer

A binding price ceiling is a price control set by the government that prevents prices from rising above a certain level. In this graph, we can see that the equilibrium price is $10, and the equilibrium quantity is 20. If a binding price ceiling is set below the equilibrium price, it becomes the new price ceiling, and the market will face a shortage of the good.

If the price ceiling is set at $15 or $30, it would not be binding since the market equilibrium price is $10. If the price ceiling is set at $11, it would also not be binding since the market equilibrium price is still below it. Therefore, the only binding price ceiling that could be set in this market is $8. This would create a shortage of the good, as buyers would want to buy more than sellers are willing to sell at this lower price.

A Binding Price Ceiling That Could Be Set in the Market