Question

The imposition of a binding price ceiling on a market causes:

a) Surplus
b) Shortage
c) Equilibrium
d) Expansion

Answer 1

A price ceiling is a government-imposed limit on the price that can be charged for a good or service. When a binding price ceiling is set below the equilibrium price, it causes a shortage in the market.

Step-by-step explanation:

A price ceiling is a government-imposed limit on the price that can be charged for a good or service. When a binding price ceiling is set below the equilibrium price, it causes a shortage in the market. This means that the quantity demanded exceeds the quantity supplied at the price ceiling, leading to a situation where consumers are willing to buy more of the good than sellers are willing to supply.