Answer to Question #230173 in Microeconomics for sindly

Question

Assume that the government imposes price caps on the mask market, construct a supply and demand market for masks, and explain how non-binding and/or binding price caps lead to reduced market efficiency.

Answer 1

Price controls are classified as either "binding" or "non-binding." Because it has no effect on the equilibrium price, a non-binding price regulation is not truly an economic issue. If a price ceiling is placed higher than the market equilibrium, it will have no effect on the price.