How Do Consumers Who Are Subject to a Binding Price

question 122

Multiple Choice

How do consumers who are subject to a binding price ceiling respond as the time frame shifts from the short run to the long run?

• A) Consumers are increasingly willing to substitute away from the good,and their elasticity of demand becomes less elastic.
• B) There are no changes,and elasticity remains unchanged.
• C) Consumers are increasingly willing to substitute away from the good,and their elasticity of demand becomes more elastic.
• D) Consumers are less willing to substitute away from the good,and their elasticity of demand becomes less elastic.
• E) Consumers are less willing to substitute away from the good,and their elasticity of demand becomes more elastic.

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Definitions:

Fixed Costs

Costs that do not change with the amount of goods or services produced, such as rent, salaries, and insurance premiums.

Depreciation

An accounting method of allocating the cost of a tangible asset over its useful life.

Sales Price

The total cost that a consumer incurs to buy a product or service from a merchant.

Fixed Costs

Expenses that do not change with variations in the level of output or sales, such as rent, salaries, and insurance.