If the government sets a maximum price for gasoline above th

If the government sets a maximum price for gasoline above the equilibrium price:

Select one:

a. quantity demanded of gasoline will equal to quantity supplied of gasoline.

b. there will be excess demand for gasoline.

c. there will be excess supply for gasoline.

d. demand for gasoline will be less than supply for gasoline.

Solution

If the government sets a maximum price for gasoline above the equilibrium price,then it is not binding.

Since price can fall below the maximum price, so market automatically result in equilibrium.Hence quantity demanded of gasoline will equal to quantity supplied of gasoline.

For it is to be binding,It has to be below equilibrium.

So correct option is a.)