Question

The imposition of a binding price ceiling on a market causes

Answer 1

Causes quantity demanded to be greater than quantity supplied

Step-by-step explanation:

Price ceiling when the regulated price set by the government is below the equilibrium price determined by the interaction of forces of demand and supply.

Invariably, a lower price would bring about consumers demanding more of the item and the suppliers that are not encouraged to supply at the same level since their output commands a much lower price than would have been the case if invisible hands of demand and supply were left to determine happenings in the market place,hence the lower the price the lower the quantity supplied.

Answer 2

a) Quantity demanded to be greater than quantity supplied

Step-by-step explanation:

Here are the options to this question :

a) Quantity demanded to be greater than quantity supplied

b) Quantity demanded to be less than quantity supplied

c) Quantity demanded to be equal to quantity supplied

d) The price of the good to be greater than its equilibrium price

A price ceiling is when the government or an agency of the government sets the maximum price for a good or service.

A price ceiling is binding when it is set below equilibrium price.

When a binding price ceiling is imposed, Quanitity supplied falls because price is below equilibrium price. The fall in supply is in line with the law of supply which says, the higher the price, the higher the quantity supplied and the lower the price , the lower the quantity supplied.

While The Quanitity demanded increases in line with the law of supply. The law of demand states that the higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded.

Quantity demanded to be greater than quantity supplied

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