There are many teenagers who would like to work at gas stations, but they are not hired due to minimum-wage laws. Price floor Binding The government prohibits gas stations from selling gasoline for more than $3.40 per gallon. Price ceiling Non-binding The government has instituted a legal minimum price of $3.40 per gallon for gasoline.
Suppose that, in a competitive market without government regulations, the equilibrium price of gasoline is $3.00 per gallon.
Complete the following table by indicating whether each of the statements is an example of a price ceiling or a price floor and whether it is binding or nonbinding.
a. The government prohibits gas stations from selling gasoline for more than $2.50 per gallon.
Price Control Binding or Not
selector 1 selector 2
Price ceiling Binding
Price floor Non-binding
b. The government has instituted a legal minimum price of $3.40 per gallon for gasoline.
Price Control Binding or Not
selector 3 selector 4
Price ceiling Binding
Price floor Non-binding
c. There are many teenagers who would like to work at gas stations, but they are not hired due to minimum-wage laws.
Price Control Binding or Not
selector 5 selector 6
Price ceiling Binding
Price floor Non-binding