Question

Which of the following would decrease quantity demanded, decrease quantity supplied and result in a lower price for the sellers?

A. A nonbinding price ceiling.
B. A binding price floor.
C. A tax.
D. A binding price ceiling.

Answer 1

C. A tax.

A binding price ceiling, set below the equilibrium price, leads to an increase in quantity demanded, a decrease in quantity supplied, and a lower market price for sellers, creating a shortage.

Step-by-step explanation:

The question involves the effects of different market interventions on the quantity demanded, quantity supplied, and resulting in a lower price for the sellers. Among the options given, a binding price ceiling fits this description. A binding price ceiling is set below the equilibrium price, leading to an increase in quantity demanded and a decrease in quantity supplied, creating a shortage.

This results in a lower price for sellers compared to the equilibrium price. On the other hand, a nonbinding price ceiling would not affect the market as it is set above the equilibrium price. A binding price floor would result in a surplus, not a decrease in quantity demanded, and a tax would shift the supply curve leftward, typically increasing the price buyers pay and lowering the price sellers receive, but not necessarily decreasing the quantity supplied.