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Explain the effect of 'Maximum Price Celling' on the market of a good. Use diagram |
Answer» Solution :Maximum Price Ceiling refers to imposition of UPPER limit on the price of a good by the government. For example, in the diagram, OP is Price Ceiling, while equilibrium price is `OP_(1)`. At this price, the PRODUCERS are WILLING to supply only `PA (Or OQ_(1))`, while consumers demand `PB (Or OQ_(2))`. The effect of the ceiling is that shortage, EQUAL to `AB (Q_(1)O_(2))`, is created, which may further lead to BLACK marketing. 
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