Chapter 6

In the event of a binding price ceiling, what is one function that a black market serves?

ALL suppliers benefit from binding price floors.

ALL consumers benefit from binding price ceilings.

What will be the effect of a NON-binding price ceiling?

Illegal markets emerge with price ceilings because sellers want to sell products at higher prices.

Governments impose price floors to set a maximum price that consumers should pay for a good.

Governments impose price ceilings to set a maximum price that suppliers can charge for a good.

What will be the effect of a binding price ceiling?

As supply and demand become more elastic in the long run shortages caused by price ceilings _____________.