Question

The language of price controls Suppose that, in a competitive market without government regulations, the equilibrium price of hamburgers is $7 each. Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding. Statement Price Control Binding or Not The government has instituted a legal minimum price of $8 each for hamburgers. The government prohibits fast-food restaurants from selling hamburgers for more than $5 each. Due to new regulations, fast-food restaurants that would like to pay better wages in order to hire more workers are prohibited from doing so.

Answer 1

The government has instituted a legal minimum price of $8 each for hamburgers. - Binding.

The government prohibits fast-food restaurants from selling hamburgers for more than $5 each. - Binding.

Due to new regulations, fast-food restaurants that would like to pay better wages in order to hire more workers are prohibited from doing so. - Binding.

Explanation:

For a country or an economy where the government is powerful and strong, there are certain rules and regulations made by the government to regulate the businesses and the organisations of the economy.

These rules and regulations are bound on the enterprise or the business and they can not move away or against this ruling of the government. They have to follow it or else there might be a punishment for them to be given by the government.