Question

True or false. Unintended market conditions, including black markets and shortages, can occur through the price restraint of a price ceiling set above the market-clearing price.

Answer 1

false

Step-by-step explanation:

Price ceiling is when the government or an agency of the government sets the maximum price for a product. It is binding when it is set below equilibrium price.

Price floor set above the market-clearing price is non binding

Effects of a binding price ceiling

1. It leads to shortages

2. it leads to the development of black markets

3. it prevents producers from raising price beyond a certain price

4. It lowers the price consumers pay for a product. This increases consumer surplus