Question

If the government implements a non-binding or non-effective price ceiling on insulin, this will

A) increase the price consumers will pay for insulin

B)Decrease the quantity of insulin the manufacturers will be willing to supply

C)Have to set above the market equilibrium price to be effective

D)Have no impact on either the equilibrium price or quantity

Can you explain why its the right answer too please

Answer 1

Option D.

• If the government implements a non binding or non effective price ceiling on insulin, this will have no impact on either the equilibrium price or quantity.
• We know that price ceiling is said to be binding if the government sets a limit that forces firms to lower their prices of goods and services below the equilibrium price.
• If the equilibrium price is already lower than the price ceiling then that price ceiling is said to be non binding or non effective price ceiling as they do not have any affect on market prices and quantities.