Government intervention through price ceilings and price floors fixes prices above or below the market equilibrium. Since prices cannot adjust freely according to demand and supply, the market fails to clear. This creates excess demand under a price ceiling or excess supply under a price floor. Option D correctly explains why equilibrium is disturbed. Option A is incorrect because price controls do not shift demand and supply curves. Option B is incorrect because consumer preferences remain unchanged. Option C is incorrect because production technology is unaffected by price regulation.

Statement 1 is correct because price ceilings and price floors are explained using the perfect competition model. Statement 2 is incorrect because price regulation often creates excess demand or excess supply, preventing market clearing. Statement 3 is correct because government intervention is used when market prices are considered too high or too low. Hence, Option C is correct.

A price ceiling affects the market only when it is below the equilibrium price. If the ceiling is fixed above the equilibrium price, sellers are already charging less than the legal maximum. Therefore, the market continues to operate at the equilibrium price without any change.

The Assertion is false because price ceilings are imposed to protect consumers, not to maximize suppliers' revenue. The Reason is also false because a price ceiling is imposed below, not above, the equilibrium price. Therefore, Option A is correct.

At pc = 25: Quantity Demanded = 200 − 25 = 175 Quantity Supplied = 120 + 25 = 145 Therefore, Excess Demand = 175 − 145 = 30 units Hence, Option D is correct.

When a price ceiling is imposed below the equilibrium price, consumers demand more while producers supply less. Since sellers cannot provide more than they produce, the quantity actually sold is limited by the quantity supplied at the ceiling price. Therefore, Option C is correct.

The sequence begins with identifying essential goods that some consumers cannot afford. The government then imposes a price ceiling below equilibrium, causing quantity demanded to exceed quantity supplied. To distribute the limited quantity fairly, ration coupons are issued. Thus, the correct order is: 1 → 2 → 4 → 3 Hence, Option B is correct.

The correct matching is: 1 → c: Ration coupons regulate purchases. 2 → d: Fair Price Shops distribute rationed goods. 3 → a: Stipulated amounts prevent one consumer from buying the entire limited supply. 4 → b: Excess demand creates the need for rationing. Therefore, Option A is correct.

A black market develops when price ceilings create shortages and rationing limits purchases. Consumers who cannot obtain enough goods legally may be willing to pay more than the controlled price, encouraging illegal transactions. Therefore, Option B is correct.

When a price ceiling creates excess demand, not all consumers can buy the quantity they want. Some consumers are willing to pay more than the legal price, while some sellers are willing to sell illegally at those higher prices. This bypasses the rationing system and results in black market transactions. Therefore, Option D is correct.

A price floor is a government-imposed minimum legal price below which a good or service cannot be sold. It is introduced to protect producers' incomes or workers' wages. When fixed above the equilibrium price, it creates excess supply (surplus). Option A correctly defines a price floor. Option B describes a price ceiling. Option C is incorrect because agricultural surpluses generally require government purchase. Option D is incorrect because price floors create excess supply, not excess demand.

Minimum wage legislation is an example of a price floor in the labour market. Its purpose is to ensure that workers receive at least a legally prescribed minimum wage and are protected from excessively low wages. Option C correctly states the objective. Option A is incorrect because minimum wages generally increase labour costs. Option B is incorrect because minimum wages may create labour surplus (unemployment). Option D is incorrect because labour shortage is not the policy objective.

A binding price floor encourages producers to supply more because of the higher price. Consumers, however, reduce their purchases because of the increased price. Therefore, quantity supplied (q'f) exceeds quantity demanded (qf), creating excess supply (surplus).

At the price floor, quantity supplied exceeds quantity demanded. The horizontal distance between the market supply curve and the market demand curve at that price measures the amount of surplus (excess supply). Therefore, Option B is correct.

Agricultural support prices (such as Minimum Support Price) are effective only when they are fixed above the market equilibrium price. This ensures that farmers receive a higher guaranteed price even if the market price falls. Such a policy often creates surplus production, which the government purchases to maintain the support price.

A price floor fixed above equilibrium creates excess supply. If the government does not purchase this surplus, sellers will try to dispose of the excess output by lowering prices. This puts downward pressure on the market price and makes the price floor ineffective. Therefore, Option A is correct.

Agricultural price support programmes guarantee farmers a minimum purchase price, preventing prices from falling below a specified level. This is a classic example of a price floor imposed by the government.

The correct matching is: 1 → b: Minimum wage is a labour market price floor. 2 → c: Kerosene price ceiling helps consumers buy fuel at affordable prices. 3 → d: Fair Price Shops distribute rationed goods. 4 → a: Buffer stock buying prevents surplus from reducing prices. Therefore, Option D is correct.

The passage clearly states that the government-imposed lower limit on the price that may be charged is called a price floor. This policy protects suppliers from excessively low prices.

The passage explains that an agricultural price floor creates excess supply. To prevent market prices from falling, the government purchases the surplus at the predetermined support price. This maintains the effectiveness of the price floor and protects farmers' incomes.