When there is a binding price ceiling,
A)there is no equilibrium.
B)the quantity demanded does not equal the quantity supplied.
C)all potential customers are happy because they can buy the good at a lower price.
D)producers move production to another country.

Question

Quizplus · Accepted Answer

With a binding price ceiling, the price is set below the market equilibrium price, leading to excess demand. This means that the quantity demanded exceeds the quantity supplied, creating a shortage in the market. While customers may benefit from buying the good at a lower price, there are fewer goods available, leading to some customers being unable to purchase the good at all. Producers are also incentivized to reduce production or move to other markets with higher prices since they cannot make a profit at the lower price ceiling.

When There Is a Binding Price Ceiling