If a good is subject to a binding price ceiling and you purchase it on the black market,what do you expect to happen to the availability of the good over time?
A) The availability of the good will rise over time as the supply curve becomes more elastic and the demand curve becomes more inelastic.(The shortage of the good will fall.)
B) The availability of the good will fall over time as both the supply and demand curves become more elastic.(The shortage of the good will fall.)
C) The availability of the good will fall over time as both the supply and demand curves become more elastic.(The shortage of the good will rise.)
D) The availability of the good will rise over time as the demand curve becomes more elastic and the supply curve becomes more inelastic.(The shortage of the good will fall.)
E) The availability of the good will not change over time.

Question

Quizplus · Accepted Answer

When a good is subject to a binding price ceiling, its price is artificially held below the market equilibrium price, causing a shortage of the good to arise. When buyers are unable to obtain the good legally, they turn to the black market where the price is higher than the ceiling but lower than the market price. As a result, the demand for the good on the black market increases, while the legal supply decreases. This, in turn, causes the supply and demand curves to become more elastic over time, leading to a decrease in the availability of the good. Therefore, the correct answer is C - the availability of the good will fall over time as both the supply and demand curves become more elastic, and the shortage of the good will rise.

If a Good Is Subject to a Binding Price Ceiling