AP MicroeconomicsSupply & Demand
Binding vs. Non-Binding Price Control
A price control is binding only when it forces price away from equilibrium: a binding ceiling sits below equilibrium (causing shortages) and a binding floor sits above it (causing surpluses).
A price ceiling above the equilibrium price or a price floor below it does nothing—the market clears at equilibrium and the control is non-binding. A control bites only when it prevents the equilibrium price: a binding ceiling (below equilibrium) creates a persistent shortage because quantity demanded exceeds quantity supplied, while a binding floor (above equilibrium) creates a surplus. This is why minimum wage 'binds' only above the market wage and rent control 'binds' only below the market rent.
Formula / Example
Binding ceiling: P_ceiling < P_equilibrium ⇒ shortage. Binding floor: P_floor > P_equilibrium ⇒ surplus.