Suppose that the equilibrium price of an article is N5.00 but the government fixes the...

Suppose that the equilibrium price of an article is N5.00 but the government fixes the price by law at N4.00, the supply will be

  • A. The same as equilibrium supply
  • B. Greater than equilibrium supply
  • C. Less than the equilibrium supply
  • D. Determined later by government
  • E. None of these
Correct Answer: Option C
Explanation

If the market price is below the equilibrium price, quantity supplied is less than quantity demanded, creating a shortage. The market is not clear. It is in shortage. Market price will rise because of this shortage.


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Contributions (153)

Divinest
3 years ago
I believe the answer is c because as a marketer yu go t market to make a profit so in this case instead of you make a profit you then find out that government have decreased the amount inwhich you proposed in your mine to sell the goods, so therefore you will be discouraged to supply more. Thanks
EconsKing
6 years ago
It is C becos d law of Supply states dat the Lower the Price,the lower the Quantity Supplied...therfore,since Govt reduces price below the Ep,Supply will b less dan demand..(Excess demand)This Effect is known as Maximum Price Contol...
Hismajesty
1 year ago
Equilibrium price is the price which favours both supplies and demands in other words suppliers and demanders. Both are willing to supply and demand. When the Government reduces the price from equilibrium price, it will only favour demand/demanders and not supply/suppliers so they will automatically reduce supply
victoria odoh
4 years ago
itz c because the seller wil not wnt to sell at low price
Samuel Eli
1 year ago
Already u have been told that the equilibrum price is n5.And the government fixes the price to ben4 .it therefore means logically the answer is less than equilibrum price
Peterufuoma5
7 years ago
D correct answer is C bcos no bdy is ready to sell at lost. D sellers surpose to sell at 50 wich is d eqilibrum and a gov forcefull by law reduce d price.
D-wise
2 years ago
C is correct
Victor
6 months ago
If the price of a commodity is high definitely the suppliers will be willing to supply more if it to the market and vice versa. This in turn fulfils the first law of supply - the higher the price, the higher the quantity supllied and vice versa.
BENJI07
1 year ago
the law of supply states that the higher the price the higher the quantity supplied and the lower the price the lower the quantity supplied
Beniluv14
6 years ago
D ans is c
Enobong ebie
3 years ago
d ans. is c cos wen d price of a certain commodity is fixed, d less d supply and the equilibrum supply is going 2 b low also compared 2 dat of which d govt wouldn't hv intervene
JJ.Efebest
3 years ago
This question relates to the law of supply which states that the higher the price, the higher the quantity supply and the lower the price the lower the quantity supply.
beatrice chinedu
5 years ago
the answer is C
Sensibility55
3 years ago
The answer is "c" becos has govt change the price it affect the law of equilibrium.
aderibigbewale
4 years ago
The selected answer is wrong:

i think d supply will be greater dan d equlibrium supply so d answer is c

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