ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Detailed Solution. The correct answer is A price ceiling below the equilibrium price often leads to a Shortage of commodity and black marketing. When a price ceiling is set below the equilibrium price, quantity demanded will exceed quantity supplied, and excess demand or shortages will result.

Detailed explanation-2: -A decrease in demand will cause the equilibrium price to fall; quantity supplied will decrease. An increase in supply, all other things unchanged, will cause the equilibrium price to fall; quantity demanded will increase. A decrease in supply will cause the equilibrium price to rise; quantity demanded will decrease.

Detailed explanation-3: -If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. Excess demand or a shortage will exist. If the price is above the equilibrium level, then the quantity supplied will exceed the quantity demanded. Excess supply or a surplus will exist.

Detailed explanation-4: -A price ceiling above the competitive equilibrium price will result in a surplus. A price ceiling below the competitive equilibrium price will result in a shortage.

Detailed explanation-5: -What happens to equilibrium supply and demand if a price floor is set below the equilibrium price? Nothing happens. Since the floor is below equilibrium, the market is still able to determine the quantity and price the same way it always does.