If a binding price ceiling is set below the equilibrium price, the market is most likely to experience:
Correct answer: B. A shortage because buyers demand more units
- A. A surplus because sellers offer more units
- B. A shortage because buyers demand more units
- C. A higher equilibrium price through free adjustment
- D. No change because the ceiling affects only sellers
Explanation
A price ceiling below equilibrium keeps the legal price artificially low. At that price, quantity demanded exceeds quantity supplied, producing a shortage.
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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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