Question

Binding price ceilings benefit consumers because they allow consumers to buy all the goods they demand at a lower price. Is this statement true or false?

1) True
2) False

Answer 1

The claim that price ceilings enable consumers to buy all they demand at lower prices is false, as they actually create shortages and reduce social surplus due to deadweight loss.

Step-by-step explanation:

The statement that binding price ceilings benefit consumers because they allow consumers to buy all the goods they demand at a lower price is false. While a price ceiling may transfer some producer surplus to consumers, encouraging their support, it does not mean consumers can purchase all they demand at the lower price. Under a price ceiling, the market price is set below the equilibrium, leading to a higher quantity demanded (Qd) than the quantity supplied (Qs). This results in a shortage, meaning that not all consumers will be able to buy what they want. Moreover, price ceilings can cause deadweight loss by blocking transactions that buyers and sellers would otherwise be willing to make, reducing overall social surplus.