How government intervention through price control policy will have an impact on the market?

(A) The government imposed lower limit on the price that may be charged

(B) For certain goods and services, a fall in price below a particular level is not desirable

(C) Thereby leading to an excess supply in the market

(D) Government needs to buy the surplus at the predetermined price

Choose the correct answer from the options given below:

Option 1 -> This presents the logical sequence: (B) reason for intervention, (A) action taken (price floor), (C) market impact (excess supply), (D) government response (buying surplus). This correctly explains the cause-effect chain of price floor policy.

Option 2 -> This sequence starts with the government action (A) before explaining the reason (B), which is illogical as policy rationale should come first.

Option 3 -> This places (D) before (C), suggesting government buys surplus before excess supply occurs, which reverses the cause-effect relationship.

Option 4 -> This begins with excess supply (C) before explaining the policy, which is illogical as the market impact cannot precede the policy intervention.

Hence, Option 1: (B), (A), (C), (D) -> This represents the correct logical flow of price floor implementation: First, the government identifies that prices falling below a certain level is undesirable (B) - for example, protecting farmers' income. Then, it imposes a price floor - a minimum price below which goods cannot be sold (A). This creates excess supply (C) as the artificially high price increases quantity supplied while decreasing quantity demanded. Finally, to maintain the price floor, the government must purchase the surplus (D), as seen in agricultural support programs. This sequence properly captures the complete policy cycle from rationale to implementation to market distortion to corrective action. -> correct