CIMA BA1 · Chapter 5 · Question 5 of 10
If the government imposes an effective maximum price below the equilibrium price, the most likely result is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Excess demand, possibly leading to queues, rationing or black markets
Explanation
A maximum price below equilibrium increases quantity demanded and reduces quantity supplied, creating a shortage. Non-price rationing methods and illegal trading at higher prices often follow. A maximum price set above equilibrium would have no effect.
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