● The government fixes a minimum price of certain goods in the market. This is called the minimum price ceiling.
● This price is usually set higher than the equilibrium price.
● This creates a situation of excess supply.
● Since the producers are unable to sell their goods, they resort to the illegal sale of goods below the minimum price ceiling.
● If the prevailing market price is above the equilibrium price, there would be a situation of excess supply.
● The producers are not able to sell all their goods.
● This creates competition among the sellers of that good.
● The price begins to fall.
● The demand increases due to the falling price and supply begin to decrease.
● This continues till equilibrium is reached.
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What is the minimEconomics - Board Papers