Question

When a certain price control is imposed on this market, the resulting quantity of the good that is actually bought and sold is such that buyers are willing and able to pay a maximum of P 1 dollars per unit for that quantity and sellers are willing and able to accept a minimum of P 2 dollars per unit for that quantity. If P 1 - P 2 = $3, then the price control is a. a price ceiling of $3.00. b. a price ceiling of $5.00. c. a price floor of $6.00. d. either a price ceiling of $3.00 or a price floor of $6.00.

Answer 1

Answer: Option A is the most correct option. A price ceiling of $3.00. because it is the maximum amount that can be added to the floor price of that commodity

Explanation: price ceiling is a price regulation process, whereby a group or the government, imposes a maximum amount that can be added to the floor price of that commodity, so that price of goods will not be over expensive for buyers. The floor price is the minimum price that goods can be sold.

P1 is the maximum amount the goods can be sold, while P2 is the floor Price. This makes $3.00 to be the price ceiling, because it is the maximum amount that can be added by the seller on that commodity.