If a Price Ceiling Is Binding

question 53

Multiple Choice

If a price ceiling is binding:

• A)the equilibrium price is above the ceiling and there will be a shortage
• B)the equilibrium price is above the ceiling and there will be a surplus
• C)the equilibrium price is below the ceiling and there will be a shortage
• D)the equilibrium price is below the ceiling and there will be a surplus

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Definitions:

Elastic Demands

This refers to the sensitivity of the quantity demanded of a good to a change in its price, where a small price change leads to a larger change in quantity demanded.

Elastic Demands

A situation where the demand for a good or service significantly changes in response to changes in its price.

Close Substitutes

Products or services that can easily replace each other in the eyes of the consumer, offering similar benefits and functionalities.

Inelastic

A term describing a situation in which the quantity demanded or supplied of a good or service is relatively unresponsive to changes in price.