Question

Assume that the current market equilibrium price for milk is $2.80 per gallon and that 5 million gallons are sold per day. If the government sets a price ceiling of $2.00 per gallon, which of the following is lie?
(A) The demand for milk will increase.

(B) The supply of milk will decrease.

(C) There will be an excess supply of milk in the market.

(D) More than 5 million gallons of milk will be sold.

(E) Less than 5 million gallons of milk will be sold.

Answer 1

Answer:

The options B and E are both false statement in this question.

Explanation:

When the price of any commodity falls the demand of the product eventually increases, this means greater the price of the product lower will be the demand of the product. And remember that greater is the Demand the greater would be the supply of the product.

So the options A, C and D are justified statements whereas options B and E are unjustified statements.