A binding price ceiling is a government-imposed limit on how high a price can be charged for a product. When a binding price ceiling is imposed, the price is set below the market equilibrium, leading to a higher quantity demanded and a lower quantity supplied. This situation results in a shortage of the good in the market, as the quantity demanded exceeds the quantity supplied at that price. Producers may not be willing to supply enough of the product at the lower price, causing some consumers to be unable to purchase the product. Therefore, when a binding price ceiling is imposed, a shortage occurs due to the imbalance between demand and supply.
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