A Price Ceiling That Is Not a Binding Constraint Today

question 26

True/False

A price ceiling that is not a binding constraint today could cause a shortage in the future if demand were to increase and raise the equilibrium price above the fixed price ceiling.

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Definitions:

Price Elasticity

A measure of how much the quantity demanded of a good or service changes in response to a change in its price.

Consumption Reduction

A decrease in the amount of goods and services consumed by individuals or communities, often aimed at saving resources or money.

Price Increase

An upward adjustment in the cost of goods or services, often driven by factors like inflation, increased demand, or higher production costs.