A Level Economics (9708)•9708/12/M/J/22
Explanation
Price ceiling causes excess demand at $15 Steps:
- Compute quantity demanded: Q_d = 5000 - 2(15) = 4970 units.
- Compute quantity supplied: Q_s = 3000 - 2(15) = 2970 units.
- Determine imbalance: Q_d > Q_s, resulting in excess demand of 2000 units.
- Identify regulation type: Excess demand at the regulated price indicates a binding price ceiling (maximum price), as it prevents price from rising to clear the market.
Why A is correct:
- A binding price ceiling below the would-be market-clearing price (conceptually higher here due to persistent shortage) restricts price increases, leading to excess demand per standard supply-demand law.
Why the others are wrong:
- B: Minimum price (floor) above equilibrium causes excess supply, not demand.
- C: Minimum price causes surplus, not shortage (excess demand).
- D: Maximum price causes shortage, not surplus (excess supply).
Final answer: A
Topic: Methods and effects of government intervention in markets
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