Micro

Market Equilibrium

Medium

Which of the following is incorrect with reference to the imposition of a price floor for a good?

The government imposes a lower limit on the purchase price for some of the goods.

The floor is normally set at a level lower than the market-determined price for these goods.

It leads to an excess supply in the market.

It is also known as minimum support price(MSP).

✅ Correct Option: 2

Option 1 -> Correct statement - Price floor is indeed a lower limit or minimum price set by government.

Option 2 -> Incorrect statement - Price floor must be set ABOVE (not below) the market equilibrium price to be effective and binding.

Option 3 -> Correct statement - When price is artificially kept high, quantity supplied exceeds quantity demanded, creating excess supply.

Option 4 -> Correct statement - Price floors are commonly called Minimum Support Price (MSP), especially in agricultural markets.

Hence, Option 2 -> A price floor is only effective when set ABOVE the market-determined equilibrium price. If set below the equilibrium, it becomes non-binding as market forces would naturally push prices above the floor anyway. For example, if market price is ₹100 and government sets floor at ₹80, it has no impact. But if floor is set at ₹120, it creates binding constraints leading to excess supply as producers want to supply more at higher prices while consumers demand less. -> correct

2025: 31 May Shift 1

If demand remains constant at any changes in price of commodity then the elasticity of demand for that commodity will be....................

Zero
One
Between one and zero
Infinite

2025: 2 June Shift 1

An upward sloping straight line supply curve shooting from the X axis indicates the:

2025: 28 May Shift 1

Match List-I with List-II

List-I	List-II
(A) Price elasticity of demand will be equal to1	(I) When expenditure increases with a rise in price.
(B) Price elasticity of demand will be equal to 0	(II) When expenditure decreases with a rise in price.
(C) Price elasticity of demand will be more than 1	(III) When the quantity demanded doesn't change with the change in price.
(D) Price elasticity of demand will be less than1	(IV) When expenditure doesn't change with the change in price.

Choose the correct answer from the options given below:

(A) - (I), (B) - (II), (C) - (III), (D) - (IV)
(A) - (III), (B) - (IV), (C) - (II), (D) - (I)
(A) - (IV), (B) - (III), (C) - (II), (D) - (I)
(A) - (IV), (B) - (III), (C) - (I), (D) - (II)

2025: 2 June Shift 1

The price elasticity of supply of a commodity is 2.5. At a price of Rs.5 per unit, its quantity supplied is 300 units. What will be its quantity supplied at a price of Rs.4 per unit?

2026: 23 May Shift 1

Suppose the government sets a price for agricultural goods in the market. The market would react unless measures are taken by the government to maintain the price. Arrange the correct sequence for the procedure.

A. There would be excess supply in the market.

B. The government needs to buy the surplus at a pre-determined price.

C. The prices would fall.

D. Prices for agricultural goods are set higher than the market price by the government.

Choose the correct answer from the options given below:

2025: 3 June Shift 1

At a price of ₹8 per unit, the quantity supplied of a commodity is 200 units. If its price elasticity of supply is 1.5, if the price rises to ₹10 per unit, calculate the quantity supplied at the new price?

Which of the following is incorrect with reference to the imposition of a price floor for a good?

Solution

Related questions:

Keyboard Shortcuts

CUET Economics Past Year Questions (Topic-Wise)