Answer to Question #273502 in Economics for Shenali

Question

Market equilibrium price of white sugar is Rs. 190.00 per Kg. but government impose a maximum price of Rs. 129.00 per Kg. to easy the living cost of general public. Discuss the impact of this impose on the market and critically evaluate the practicability of achieving the government objective.

Answer 1

The imposing of such a price ceiling of Rs. 129.00 will create a shortage, because the price will be below the equilibrium, and the quantity demanded will exceed the quantity supplied.

So, the impact of this impose on the will be controversial, and the government objective may be not achieved because of resulting high shortage of white sugar.