A binding price ceiling creates?
Correct answer: C. a shortage
- A. a shortage or a surplus depending on whether the price ceiling is set above or below the equilibrium price
- B. a surplus
- C. a shortage
- D. an equilibrium
Explanation
A binding price ceiling is set below equilibrium, so the quantity demanded exceeds the quantity supplied. This creates a shortage, whereas a surplus results from a binding price floor.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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