Diagram shows excess demand at price _______ and equilibrium at price_______.
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → pc, p*
Demand and supply meet at p*, so p* is the equilibrium price. The ceiling pc lies below it; there buyers want qc but firms supply only q′c, so there is excess demand.
NCERT (2026-27): “5.2.1 Price Ceiling … Let us examine the effects of price ceiling on market equilibrium through the example of market for wheat. Figure 5.7 shows the market supply curve SS and the market demand curve DD for wheat. The equilibrium price and quantity of wheat are p* and q* respectively. 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. …” |