Explain 'black marketing' as a direct consequence of price ceiling Or Explain the concept of buffer stock as a tool of price floor.

Explain 'black marketing' as a direct consequence of price ceiling Or

1.	Explain 'black marketing' as a direct consequence of price ceiling Or Explain the concept of buffer stock as a tool of price floor.
Answer» SOLUTION :Black Market' is the consequence of maximum price ceiling. When government fixes price of the commodity below the equilibrium price, there emerges excess demand and since there is shortage at the control price, there will always be some buyers who are willing to pay a higher price than the control price and obtain the quantity that they desire. This gives rise to the existence of black markets Or 'Buffer stock' is an importanttool of price floor (MINIMUM price ceiling) when government fixes a price higher than the equilibrium price, there emerges excess supply and since there is surplus, the government will BUY the insold by committing to buy the surplus at the pre-announced support price. They may be added to its buffer stoks or used for exports. Buffer stocks may be used during natural CALAMITIES, for distribution through public distribution system, for giving to workers under 'Food for WORK' programme.