Price Controls and Market Effects

Steps:

• Identify maximum price as price ceiling: binding (below equilibrium) causes excess demand; non-binding causes no effect.
• Identify minimum price as price floor: binding (above equilibrium) causes excess supply; non-binding causes no effect.
• Match table headings to columns, assuming order: non-binding maximum, binding minimum, binding maximum.
• Select row aligning with these effects: no effect, excess supply, excess demand.

Why C is correct:

• C matches the law of supply and demand, where non-binding maximum has no effect, binding minimum creates excess supply (Qd < Qs), and binding maximum creates excess demand (Qs < Qd).

Why the others are wrong:

• A starts with excess supply, incorrect for any maximum price scenario.
• B reverses minimum and maximum effects, swapping excess supply and demand.
• D duplicates C but misaligns column order per standard headings.

Final answer: C