The state government of Dalmatia noticed that whenever its b

The state government of Dalmatia noticed that whenever its baseball team played a match in any of the local stadiums the prices of tickets became too high. It decided to impose a price ceiling on the ticket prices. The exhibit given below shows the demand curve for and the supply curve of baseball game tickets in Dalmatia. If the government were to impose a binding price ceiling, it should set the price at: Price 10 12 20 28 30 Quantity (in thousands) $80 per ticket, which would give rise to a surplus of 8,000 tickets. $80 per ticket, which would give rise to a shortage of 16,000 tickets $120 per ticket, which would give rise to a surplus of 20,000 tickets. $120 per ticket, which would give rise to a shortage of 10,000 tickets.

Solution

Answer:- Price ceilings are common government tools used in regulating. A price ceiling means that the price of a good or service cannot go higher than the regulated ceiling. An effective price ceiling is called a binding price ceiling. A binding price ceiling is when the price ceiling that is set by the government is below the prevailing equilibrium price.

So here if the government were set the binding price ceiling, then it should set the price =$80 per ticket, which would give rise to a shortage of 16000 tickets.

Since at equilibrium price the demand and supply equals 20,000 tickets

At price = $80 demand is 28,000 tickets and Supply is 12,000 tickets.

So Shortages = 28000 - 12000 = 16,000

Therefore, option (b) is correct.