Microeconomics: Market Equilibrium · Class 11 · CBSE · Commerce Economics
If the government fixes a maximum price below the equilibrium price of a commodity, what is the most likely result in the market?
Practice question from Microeconomics: Market Equilibrium (Class 11 · CBSE · Commerce Economics), with the correct answer and a step-by-step solution.
medium · MCQ · Q-73A050
If the government fixes a maximum price below the equilibrium price of a commodity, what is the most likely result in the market?
- A.Excess supply, because producers offer more than consumers demand
- B.Excess demand, because consumers demand more than producers offerCorrect answer
- C.No change in quantity demanded or supplied
- D.Equilibrium price rises automatically above the fixed price
Solution
A maximum price below equilibrium is a binding price ceiling. At this lower price, quantity demanded exceeds quantity supplied, creating excess demand or a shortage.
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