Describe the possible consequences of a government legislation of fixing the price of a commodity below the equilibrium price.

      

Describe the possible consequences of a government legislation of fixing the price of a commodity below the equilibrium price.

  

Answers


Maurice
Q41982019432.png

- When price is below equilibrium at OPG, the + quantity demanded would be Q2 and quantity supplied is Q1
- There is therefore excess demand over supply (Q1-Q2)
- Excess demand will tend to push prices up leading to reduction in demand and increase in supply until the two are equal at equilibrium point E
maurice.mutuku answered the question on August 19, 2019 at 13:34


Next: A frustum with a regular pentagonal base is such that its top is of side 12cm and bottom is of side 24cm.
Previous: Fill in each of the blank spaces with an appropriate word.

View More Business Studies Questions and Answers | Return to Questions Index


Exams With Marking Schemes

Related Questions