What is the minimum price ceiling? Explain its implications.

OR

If the prevailing market price is above the equilibrium price, explain its chain of effects.

● The government fixes a minimum price of certain goods in the market. This is called the minimum price ceiling.

● This price is usually set higher than the equilibrium price.

● This creates a situation of excess supply.

● Since the producers are unable to sell their goods, they resort to the illegal sale of goods below the minimum price ceiling.

OR

● If the prevailing market price is above the equilibrium price, there would be a situation of excess supply.

● The producers are not able to sell all their goods.

● This creates competition among the sellers of that good.

● The price begins to fall.

● The demand increases due to the falling price and supply begin to decrease.

● This continues till equilibrium is reached.