If price is forced to stay below equilibrium price, this means
a. Existence of excess supply
b. Existence of excess demand
c. Application of price ceiling
d. Application of price floor

b, c

The correct answer is Option 4: b, c

• If price is forced below equilibrium, it means that the price is artificially lower than the market-clearing price.

• This results in excess demand because:

  • At a lower price, more consumers want to buy the good.
  • However, suppliers reduce their supply since they earn less profit.
  • This mismatch creates a shortage (excess demand) in the market.

• This is an example of a price ceiling, which is a government-imposed maximum price on essential goods (e.g., rent control, price caps on medicines).

  • Price ceilings create shortages because demand increases while supply decreases.