If the price in a market is fixed by the government below equilibrium ?
Correct answer: C. There is excess demand
- A. There is excess equilibrium
- B. There is excess supply
- C. There is excess demand
- D. There is equilibrium
Explanation
A government-fixed price below equilibrium is a binding price ceiling, so buyers demand more than sellers supply. The resulting shortage is called excess demand.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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