Question

Which of the following statements is correct in case of price ceiling of a commodity fixed by the government?

Options

• It is the maximum legal price

• It is fixed below the equilibrium price

• It will create the shortage of the commodity

• All the three

Answer 1

All the three

Explanation:

A price ceiling is a maximum legal price and is effective when set below the equilibrium price. At this lower price, quantity demanded exceeds quantity supplied, creating a shortage; therefore, all three statements are correct.