The shortages associated with a binding price ceiling will be the smallest when
A)supply is highly elastic and demand is highly inelastic.
B)supply is highly inelastic and demand is highly elastic.
C)both supply and demand are highly elastic.
D)both supply and demand are highly inelastic.
E)none of the above-the size of the shortage has nothing to do with demand and supply elasticities.

Question

Quizplus · Accepted Answer

When both supply and demand are highly inelastic, the quantity supplied and demanded do not change much in response to price changes, resulting in a smaller shortage.

The Shortages Associated with a Binding Price Ceiling Will Be