Question

Due to price ceiling, what situation arises in the market?

• A. Quantity demanded>Quantity supplied
• B. Demand will be larger and deficiency in goods will remain
• C. Black marketing is possible
• D. All of these

Hint:

Remember that a price ceiling (a maximum price below equilibrium) always leads to a shortage, which can create conditions for black markets.

Answer 1

The Correct Option is D

A price ceiling is a government-imposed maximum price that can be charged for a good or service. For it to be effective, it must be set below the natural equilibrium price. This leads to several consequences:

(A) Shortage: At a price below equilibrium, consumers demand more of the good (Quantity Demanded), while producers are willing to supply less (Quantity Supplied). This creates a persistent shortage where \( \text{Quantity Demanded}>\text{Quantity Supplied} \). Statement (B) is another way of describing this shortage or "deficiency".
(C) Black Marketing: When there is a shortage, an illegal or "black" market may emerge. In this market, goods are sold at prices higher than the legal ceiling to consumers who are willing to pay more to obtain the scarce product.
Since all the listed situations are direct consequences of an effective price ceiling, the correct answer is (D).