Under which of the following situations can the government impose price ceilings?

Correct option is B

The government imposes price ceilings when there is a shortage of a product to prevent businesses from charging excessively high prices. A price ceiling sets a maximum legal price that sellers can charge, ensuring affordability for consumers.
Information Booster
· Common Examples of Price Ceilings:
1. Rent control laws: Governments impose rent ceilings in urban areas to make housing affordable.
2. Essential goods pricing: Prices of food grains, LPG, and life-saving medicines are controlled to protect consumers.
· Effects of Price Ceilings:
. Can lead to black markets where goods are sold illegally at higher prices.
. May cause quality deterioration, as producers reduce costs to maintain profits.
Additional Knowledge
· Price Floor vs. Price Ceiling:
· Price Floor: Minimum price set by the government (e.g., Minimum Support Price for farmers).
· Price Ceiling: Maximum price limit (e.g., drug price regulation).
· Other Market Controls:
· Subsidies: Government support to reduce prices for consumers.
· Quotas: Restrictions on the quantity produced or sold to control supply.