The market rent for apartments is too high for many people. The government fixes a maximum rent below the market rent. The control acts as a:
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → price ceiling and leads to excess demand for apartments
A maximum rent is an upper limit on a price, so it is a price ceiling. At a rent below the market rent, more people want apartments than owners offer, so there is excess demand for apartments.
A price floor is a lower limit set above the market price, and it leads to excess supply.
NCERT (2026-27): “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.” “Summary … Imposition of price ceiling below the equilibrium price leads to an excess demand. Imposition of price floor above the equilibrium price leads to an excess supply.” |