ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A price ceiling, such as a rent ceiling, results in a shortage if the ceiling price is less than the equilibrium price. Which of the following is a typical effect of a price ceiling set below the equilibrium price? Less of the good is produced with the ceiling than would be produced without the ceiling.

Detailed explanation-2: -A government-imposed price ceiling set below the market’s equilibrium price will create an excess demand for a product. As a result of the excess demand, either the demand curve will tend to shift to the left or the supply curve will shift to the right-or both.

Detailed explanation-3: -A price ceiling is a government-imposed limit on the price charged for a product. Governments intend price ceilings to protect consumers from conditions that could make necessary commodities unattainable. However, a price ceiling can cause problems if imposed for a long period without controlled rationing.

Detailed explanation-4: -A price ceiling is the mandated maximum amount a seller is allowed to charge for a product or service. Usually set by law, price ceilings are typically applied to staples such as food and energy products when such goods become unaffordable to regular consumers. A price ceiling is essentially a type of price control.