Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

5. Consumer and Producer Surplus; Price Ceilings and Floors

Price Ceilings, Price Floors, and Black Markets

Microeconomics

5. Consumer and Producer Surplus; Price Ceilings and Floors

Price Ceilings, Price Floors, and Black Markets

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Multiple Choice

When the government imposes a binding price ceiling, it causes

The supply curve to shift to the right

The demand curve to shift to the right

A shortage of the good

A surplus of the good

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Verified step by step guidance

Understand what a binding price ceiling is: A price ceiling is a legal maximum price that can be charged for a good. A binding price ceiling is set below the equilibrium price, preventing the market from reaching equilibrium.

Analyze the effect of a binding price ceiling on the market: Since the price is set below the equilibrium, the quantity demanded will exceed the quantity supplied, leading to a shortage.

Consider the supply and demand curves: A binding price ceiling does not cause the supply curve to shift. Instead, it restricts the price, leading to a movement along the supply curve to a lower quantity supplied.

Examine the demand curve: Similarly, a binding price ceiling does not cause the demand curve to shift. Instead, it results in a movement along the demand curve to a higher quantity demanded.

Conclude the impact: The mismatch between the higher quantity demanded and the lower quantity supplied due to the binding price ceiling results in a shortage of the good in the market.