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| 1. |
Explain the effect of 'Maximum Price Celling' on the market of a good. Use diagram |
| Answer» <html><body><p></p>Solution :Maximum Price Ceiling refers to imposition of <a href="https://interviewquestions.tuteehub.com/tag/upper-721698" style="font-weight:bold;" target="_blank" title="Click to know more about UPPER">UPPER</a> 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 <a href="https://interviewquestions.tuteehub.com/tag/producers-17149" style="font-weight:bold;" target="_blank" title="Click to know more about PRODUCERS">PRODUCERS</a> are <a href="https://interviewquestions.tuteehub.com/tag/willing-2335259" style="font-weight:bold;" target="_blank" title="Click to know more about WILLING">WILLING</a> to supply only `PA (Or OQ_(1))`, while consumers demand `PB (Or OQ_(2))`. The effect of the ceiling is that shortage, <a href="https://interviewquestions.tuteehub.com/tag/equal-446400" style="font-weight:bold;" target="_blank" title="Click to know more about EQUAL">EQUAL</a> to `AB (Q_(1)O_(2))`, is created, which may further lead to <a href="https://interviewquestions.tuteehub.com/tag/black-898687" style="font-weight:bold;" target="_blank" title="Click to know more about BLACK">BLACK</a> marketing. <br/> <img src="https://d10lpgp6xz60nq.cloudfront.net/physics_images/SG_MIC_ECO_PW_E01_021_S01.png" width="80%"/></body></html> | |