ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Price ceilings prevent a price from rising above a certain level. When a price ceiling is set below the equilibrium price, quantity demanded will exceed quantity supplied, and excess demand or shortages will result. Price floors prevent a price from falling below a certain level.

Detailed explanation-2: -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-3: -The general results of any price ceiling are the same: price ceilings are enacted in an attempt to keep prices low for those who need the product. But when the market price is not allowed to rise to the equilibrium level, quantity demanded exceeds quantity supplied, and thus a shortage occurs.

Detailed explanation-4: -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.