The government sets a price ceiling on petrol of Rs150 per litre while the equilibrium price is Rs100 per litre. Which statement is true?
Correct answer A. A significant increase in the demand for petrol could cause the price ceiling to become a binding constraint
Explanation
A ceiling above equilibrium has no effect now, but a large rise in demand could push the equilibrium above Rs150, making the ceiling bind.
Answer checked How we write and check questions
Discussion