ECONOMICS
MARKETS AND PRICES
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Quantity Demanded is greater
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Quantity Supplied is greater
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Quantity Demanded equals Quantity supplied
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None of the above
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Detailed explanation-1: -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: -The government-imposed lower limit on the price that may be charged for a particular good or service is called price floor. For certain goods and services, fall in price below a particular level is not desirable and hence the government sets floors or minimum prices for these goods and services.
Detailed explanation-3: -In which of the following situations will quantity supplied exceed the quantity demanded? In the imposition of a price floor.
Detailed explanation-4: -Therefore, the correct option is b, price ceilings cause goods to be rationed by some other means than legally determined market prices.
Detailed explanation-5: -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.