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प्रश्न
Explain the chain effects, if the prevailing market price is below the equilibrium price.
उत्तर
When the price is lower than the equilibrium market price of a good (OPe), the price ceiling leads to excess of demand. Now, the excess demand will increase the competition among consumers in the market. Thereby they consume the good at a higher price which leads to an increase in the price level, i.e. OPe.
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संबंधित प्रश्न
Giving reason, state whether the following statement is true or false.
When equilibrium price of a good is less than its market price, there will be competition among the sellers.
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Effective demand
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Under perfect competition, price is determined by equilibrium of demand and supply.
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Qd = 1700 – 2P
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When the equilibrium price is greater than the market price there will be excess supply in the market.
Answer the following question:
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