Match each price control term or policy outcome on the left with its corresponding economic description or market consequence on the right.
- Price CeilingLegally mandated maximum price fixed below equilibrium, resulting in persistent excess demand.
- Price FloorLegally mandated minimum price fixed above equilibrium, resulting in persistent excess supply.
- Black MarketIllegal trading channel that develops when price caps create shortages and unfulfilled demand.
- Buffer Stock SchemeGovernment policy that purchases surplus farm output at minimum guaranteed prices to protect producer incomes.
Answer
Price Ceiling matches with the legally mandated maximum price set below equilibrium; Price Floor matches with the legally mandated minimum price set above equilibrium; Black Market matches with the illegal trading channel arising from shortages; Buffer Stock Scheme matches with the government policy purchasing surplus farm output.
Each economic concept uniquely aligns with its defining characteristic: price ceilings set upper price limits below market equilibrium causing shortages, price floors set lower limits above equilibrium causing surpluses, black markets stem from price ceiling shortages, and buffer stock schemes manage market surpluses resulting from price floors.
Step-by-Step Solution
Key Concept
Price Controls: Definitions and Market Consequences of Ceilings and Floors