What happens when government fixes the price of any commodity below the equilibrium price?
Answers
Answer:
Demand and supply must be in balance, this is called equilibrium price. When the price of an commodity is allowed to rise or fall and match the supply with demand, there will be neither surpluses nor shortages.
If the price of an article is fixed below the equilibrium level, a shortage is likely because the low price will increase the demand. Further, consumers will not buy other substitutes and the entire process of production and selling of several commodities will be affected.
Explanation:
Answer:
Surplus and shortage:
If the market price is above theequilibrium price, quantity supplied is greater than quantity demanded, creating a surplus. Market price will fall. ... If the market price is below the equilibrium price, quantity supplied is less than quantity demanded, creating a shortage.
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