ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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to prevent inflation during to reduce supply for these goods
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to keep business people from making large profits
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to keep the goods from becoming too expensive
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to reduce demand for these goods
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Detailed explanation-1: -A price ceiling is a limit on the price of a good or service imposed by the government to protect consumers by ensuring that prices do not become prohibitively expensive. For the measure to be effective, the price set by the price ceiling must be below the natural equilibrium price.
Detailed explanation-2: -Description: Government imposes a price ceiling to control the maximum prices that can be charged by suppliers for the commodity. This is done to make commodities affordable to the general public. However, prolonged application of a price ceiling can lead to black marketing and unrest in the supply side.
Detailed explanation-3: -Price ceiling are used by the government to Prevent prices from being too high. The main reason for imposing price ceilings is to protect the interests of the consumers in situations in which they are not able to afford needed commodities.
Detailed explanation-4: -A price floor is an established lower boundary on the price of a commodity in the market. Governments usually set up a price floor in order to ensure that the market price of a commodity does not fall below a level that would threaten the financial existence of producers of the commodity.
Detailed explanation-5: -If the government imposes a price ceiling on a good that is below the market equilibrium price it is binding in nature and as a result, the quantity demanded would be more than the quantity supplied and there would be a shortage in the market.