Identify the incorrect statement regardi

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Target Exam

CUET

Subject

Economics

Chapter

Micro Economics: Market Equilibrium

Question:

Identify the incorrect statement regarding price flooring:

Options:

It causes excess demand, which often leads to the problem of black marketing.

Price floor is the minimum price of a commodity in the market as fixed by the government.

Often, the government fixes this price higher than the equilibrium market price of a commodity.

It ensures stability of income to the producers.

Correct Answer:

It causes excess demand, which often leads to the problem of black marketing.

Explanation:

The correct answer is Option (1) → It causes excess demand, which often leads to the problem of black marketing.

This statement is incorrect because:

Price flooring is a minimum price set above the equilibrium price.
It leads to excess supply, not excess demand, because producers are willing to supply more at the higher price, but consumers demand less.
This excess supply often results in surplus stock, not black marketing.
Black marketing is associated with price ceilings, not price floors.