Micro

Market Equilibrium

Easy

Comprehension:

Read the passage carefully and answer the questions based on the passage:

Concept of Price Ceiling

It is not very uncommon to come across instances where the government fixes a maximum allowable price for certain goods. The government-imposed upper limit on the price of a good or service is called a price ceiling. A price ceiling is generally imposed on necessary items like wheat, rice, kerosene, sugar etc. The objective of the price ceiling is to restrict the price of a good so that it becomes affordable for consumers to buy. However, it does not always generate the desired results. Most of the time, intervention by the government in the form of a price ceiling leads to various socio-problems.

Price ceilings are also known as............

Price floor.

Random price fixation.

Maximum price fixation.

Minium Support price.

✅ Correct Option: 3

Option 1 -> Price floor is the opposite of price ceiling; it sets a minimum price.

Option 2 -> Random price fixation is not a standard economic term.

Option 3 -> Maximum price fixation sets an upper limit on prices, which is exactly what a price ceiling does.

Option 4 -> Minimum Support price is another term for price floor, not ceiling.

Hence, Option 3: Maximum price fixation -> A price ceiling is a government-imposed maximum price that can be charged for a good or service. It is set below the equilibrium price to make goods more affordable for consumers. Since it establishes the highest price allowed, it is also known as maximum price fixation. Common examples include rent controls and price caps on essential commodities during emergencies. -> correct

Question 46

Imposition of price ceilings usually results into?

Question 47

Suppose the market determined rent for apartments is $200 per month. The government intervenes and sets the rent control at $250 per month. What is the likely impact of this intervention on market of apartments?

Question 49

The market determined price of a good is Rs. 40.The government determines the price ceiling on the good as Rs. 25. Calculate the excess demand/excess supply it will cause if the demand and supply functions are Qd= 200 – p and Qs=120+ p respectively.

Question 50

In order to be effective, the price ceiling should be determined _______.

Price ceilings are also known as............

Solution

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