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

Answer 1

A binding price ceiling would decrease quantity demanded, decrease quantity supplied, and result in a lower price for the sellers.

Step-by-step explanation:

A binding price ceiling would decrease quantity demanded, decrease quantity supplied, and result in a lower price for the sellers.

1. A nonbinding price ceiling does not have an effect on the market equilibrium and does not cause a decrease in quantity demanded or quantity supplied.
2. A tax decreases quantity supplied but may or may not impact quantity demanded, depending on the elasticity of demand. It does not necessarily result in a lower price for the sellers.
3. A binding price ceiling, which is below the equilibrium price, causes a shortage as quantity demanded exceeds quantity supplied. Due to the shortage, sellers may lower the price to make sales.
4. A binding price floor would increase the price for the sellers, not result in a lower price.