If the equilibrium price of a certain commodity is N120.00 and the government fixed its price at N110.00, the supply will be?

Assessment: JAMB UTME - Economics - 1993 Subject: Economics

Question 1 Report

If the equilibrium price of a certain commodity is N120.00 and the government fixed its price at N110.00, the supply will be?
Answer Details
If the government fixed the price of a commodity below the equilibrium price, i.e., N110.00 < N120.00, then the quantity supplied by producers will be smaller than the equilibrium quantity because the producers will be unwilling to produce and supply the commodity at a price lower than what they would get in the equilibrium. Therefore, the correct option is "smaller than the equilibrium supply".
Read lesson note on Theory Of Price Determination (WAEC)
Read lesson note on Supply (WAEC)
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