Question

With a price ceiling, there is a transfer of surplus from producers to _________ and there may be a potential ______ market due to shortage in the market.

Group of answer choices：

Consumers: Black

Government: Gray

Government: Black

Consumers: Gray

Answer 1

Price Ceiling : Price Ceiling is the uppper limit on the prices of goods and services imposed by the government to protect the interest of the consumers. It is generally imposed on esssential items. The price ceiling will be always less than the equilibrium price prevailing in the market. Price Ceiling will lead to the creation of exess demand in the market. It will create shortage of necessary goods. Consumer benefit from the price ceiling, still they have disadvantage in the form of low quality of goods delivered.

Black Market : Black Market is defined as the illegal activity of selling goods without the approval of the government. Government doen't give any approval for the black market. This black market mostly arrises at times of shortage of goods.

Gray Market : It is defined as selling of goods other than the usual distribution channel. It is a legal activity.

(29)

With a price ceiling, there is a transfer of surplus from producers to consumers and there may be a potential black market due to shortage in the market.

(a) Consumers:Black ( Correct ) : With price ceiling consumers will start getting the surplus of goods. Black market is an illegal channel and it will also arrise when there is shortage of goods. Among all other option this is the correct one.

(b) Government:Gray ( Incorrect ) : Government doen't earn much of a surplus due to the introduction of price ceiling. Even though grey market will be prevailing it doesn't do much of a damage as it is an legal activity.

(c) Government:Black ( Incorrect ) : As said above government doesn't gain much of a surplus. But black market will start functioning if there is a shortage in the market.

(d) Consumers:Gray ( Incorrect ) : Consumers will be getting surplus when price ceiling is imposed on goods, but impact for grey market won't be there much as there is already a shortage of goods.

Hence OPTION(a) Consumers:Black is the correct option.