Question

e. watch video clip 3 (see directions tab) about price ceilings and answer the questions below: 1. explain the different between binding and non - binding price ceilings. 2. what does market equilibrium mean? 3. what is a persistent shortage?

Explanation:

1. A binding price - ceiling is set below the equilibrium price, causing a shortage as quantity demanded exceeds quantity supplied. A non - binding price - ceiling is set above the equilibrium price and has no effect on the market as the market can operate freely at the equilibrium.
2. Market equilibrium occurs when the quantity demanded of a good or service equals the quantity supplied. At this point, there is no tendency for the price or quantity to change.
3. A persistent shortage is a long - term situation where the quantity demanded of a good or service is consistently greater than the quantity supplied, often due to a binding price - ceiling or other market restrictions.

Answer:

1. A binding price - ceiling is below the equilibrium price and causes a shortage; a non - binding price - ceiling is above the equilibrium price and has no market effect.
2. It is when quantity demanded equals quantity supplied.
3. It is a long - term situation where quantity demanded exceeds quantity supplied.