Imposition of price ceiling below the equilibrium price leads to__________
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Excess Demand
When the government thinks an essential good such as wheat or kerosene is too dear for the poor, it fixes a maximum price, a price ceiling. Set below the equilibrium price, it makes buyers want more while sellers offer less. The quantity demanded exceeds the quantity supplied, and the gap is excess demand, which is why rationing and black markets follow.
Why the other options are incorrect
Option (1) Excess Supply — Incorrect. Excess supply arises when the price is held above the equilibrium price, as with a price floor such as a minimum support price. A ceiling below equilibrium does the opposite.
Option (2) Decreased demand — Incorrect. A lower price does not shift the demand curve. It moves buyers along the curve, so the quantity demanded rises, not falls.
Option (3) Surplus — Incorrect. A surplus is another name for excess supply, the result of a price floor and not of a price ceiling.
Note: A same/similar question was asked in CUET (UG) in the papers below.
| 2026 | 2025 | 2024 | 2023 | 2022 |
| 12-05 S1 | 02-06 S1* | – | – | – |
* A similar question.
NCERT (2025-26): “5.2.1 Price Ceiling … It is not very uncommon to come across instances where government fixes a maximum allowable price for certain goods. The government-imposed upper limit on the price of a good or service is called price ceiling. Price ceiling is generally imposed on necessary items like wheat, rice, kerosene, sugar and it is fixed below the market-determined price since at the market-determined price some section of the population will not be able to afford these goods.… …When the government imposes price ceiling at pc which is lower than the equilibrium price level, there will be an excess demand for wheat in the market at that price.… Hence, though the intention of the government was to help the consumers, it could end up creating shortage of wheat.…”
|
