Market for an essential item of consumption is in equilibrium, but the equilibrium price is too high for the common man. What can the government do to bring down if market price but only through the normal market forces? Explain the chain of effect of the government's action.

Market for an essential item of consumption is in equilibrium, but the

1.	Market for an essential item of consumption is in equilibrium, but the equilibrium price is too high for the common man. What can the government do to bring down if market price but only through the normal market forces? Explain the chain of effect of the government's action.
Answer» Solution :The government can keep a price ceiling for the GOOD. Price ceiling refers to fixing the maximum price of a commodity that is LOWER than the equilibrium price. This fall in price will lead to an INCREASE in demand and a fall in supply. But this creates a SHORTAGE for the commodity LEADING to "black marketing".