Question

Suppose the government has imposed a price ceiling on sale of laptop computers. Which of the following events could transform the price ceiling from one that is not binding into one that is binding? The number of firms selling laptop computers decreases Improvements in production technology reduce the costs of producing laptop computers the number of consumers buying laptop computers decreases Consumers' income decreases, and laptop computers are a normal good

Answer 1

Answer:

The number of firms selling laptop computers decreases

Explanation:

Price ceiling is the legal maximum price for a good or service. It is a government imposed price control mechanism put in place to limit how high the price for a product, services or commodities can be.

Government out this in place so as to protect the consumers by ensuring commodities prices don not become expensively high or conditions that might warrant commodities to be expensive.

In the instance above, since the government have placed a price ceiling on sales of laptop computers, the factor/event that would make the market change from price ceiling that is not binding to one that is binding is if the number of firms selling laptop decreases, this would result that the price ceiling not initially having effect on the market price to do have effects on the market prices as the required price set for the sales of laptop will be at price below equilibrium and bind on the remaining number of sellers of laptops in the market. It will mean that the remaining firms selling laptop will not be able to satisfy the market and demand for laptop because the price has been artificially set low by the government.