The correct answer is option 2: B-2
-
A. Price Ceiling → Creates Excess Demand (Not Increase in Supply)
- Price ceiling is a maximum price limit set below equilibrium (e.g., rent control, essential goods).
- It creates excess demand because consumers demand more, but producers supply less.
-
B. MSP (Minimum Support Price) → 2. Excess Supply ✅
- MSP is a price floor for agricultural products set above the equilibrium price to protect farmers.
- More is produced than consumed, creating excess supply (surplus).
- ✅ This is the correct pair.
-
C. Increase in Demand → Rightward Shift (Not Leftward Shift)
- If demand increases, the demand curve shifts right, not left.
- The statement is incorrect.
-
D. Price Floor → Creates Excess Supply (Not Excess Demand)
- A price floor (minimum price) set above equilibrium reduces demand and increases supply, leading to excess supply (e.g., minimum wages causing unemployment).
- The statement incorrectly pairs price floors with excess demand instead of excess supply.
|
