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6 July, 19:06

If a price ceiling is not binding, then

a. the equilibrium price is above the price ceiling.

b. the equilibrium price is below the price ceiling.

c. it has no legal enforcement mechanism.

d. None of the above is correct because all price ceilings must be binding.

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Answers (1)
  1. 6 July, 22:39
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    The correct answer is option b.

    Explanation:

    A price ceiling refers to the control limit fixed by the government or a group on how high prices could be charged for a product. It is generally imposed to protect consumers from very high prices and keep the necessary commodities affordable for consumers.

    A binding price ceiling means that the equilibrium price is above the price ceiling. When the price ceiling is fixed at a price level lower than the equilibrium price it binds the market for that product.

    When a price ceiling is not binding, it is fixed above the equilibrium price. A non-binding price ceiling does not affect the market price.
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