Determine whether each of the following statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding. a. The government prohibits fast-food restaurants from selling hamburgers for more than $8 each.
b. Due to new regulations, fast-food restaurants that would like to pay better wages in order to hire more workers are prohibited from doing so.
c. The government has instituted a legal minimum price of $5 each for hamburgers.

price ceiling non binding

price ceiling binding

price floor non-binding

Explanation:

A price floor is when the government or an agency of the government sets the minimum price of a product. A price floor is binding if it is set above equilibrium price.

the minimum price for hamburgers is $5. this is an example of a price floor

Price ceiling is when the government or an agency of the government sets the maximum price for a product. It is binding when it is set below equilibrium price.

The government sets the maximum price for hamburgers. this is an example of a price ceiling

Restaurants are prevented from hiring more workers and paying them a better wage. this is an example of a binding price ceiling

Effects of a price ceiling

1.It leads to shortages

2.it leads to the development of black markets

3.it prevents producers from raising price beyond a certain price

4.It lowers the price consumers pay for a product. This increases consumer surplus

for storing the moneys