ECONOMICS
MARKETS AND PRICES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The quantity supplied of a good is greater than the quantity demanded
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The Equilibrium quantity supplied is lower than actual quantity supplied
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The government provides subsidies to producers
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The market price is below the equilibrium price
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Detailed explanation-1: -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: -Just as a price above the equilibrium price will cause a surplus, a price below equilibrium will cause a shortage. A shortage is the amount by which the quantity demanded exceeds the quantity supplied at the current price.
Detailed explanation-3: -In the face of a shortage, sellers are likely to begin to raise their prices. As the price rises, there will be an increase in the quantity supplied (but not a change in supply) and a reduction in the quantity demanded (but not a change in demand) until the equilibrium price is achieved.
Detailed explanation-4: -Conversely, if the price of a good is below equilibrium, then it must be that the quantity of the good demanded exceeds the quantity of the good supplied-meaning that there is a shortage of the good (at the existing price).