Question

In a market with a binding price control, a. there is an imbalance between the quantity supplied by sellers and the quantity demanded by buyers. b. ​the costs of production are fully reflected in the price paid. c. ​the price observe reflects the scarcity of the good. d. ​all of the above are true.

Answer 1

The answer is: A) there is an imbalance between the quantity supplied by sellers and the quantity demanded by buyers.

Step-by-step explanation:

Price controls can be divided into

• price ceilings: the price of a certain product or services can not be higher than its specified price ceiling
• price floors: the price of a certain product or services can not be lower than its specified price floor

When a price ceiling is enforced, the quantity demanded of a product or service will exceed the quantity supplied of that product or service, since the price is kept artificially below the equilibrium level.

When a price floor is enforced, the quantity supplied of a product or service will exceed the quantity demanded of that product or service, since the price is kept artificially above the equilibrium level.