Question

Arrange the following statements in the correct chronological sequence regarding the impact of government intervention in the form of price control in the market: A. There will be excess demand for sugar at that price
B. Government imposes an upper limit on the price of sugar
C. Sugar is distributed to everyone through a system of rationing
D. This may lead to a shortage of sugar in the market

• A. A, B, C, D
• B. A, C, B, D
• C. B, A, D, C
• D. C, B, D, A

Hint:

Price ceiling below equilibrium causes: \[ \text{Excess demand} \rightarrow \text{Shortage} \rightarrow \text{Rationing} \]

Answer 1

The Correct Option is C

Concept:
Price control means the government fixes the price of a good. When the government imposes a maximum price below the equilibrium price, it is called price ceiling. This usually creates excess demand and shortage.
Step 1: Government first fixes the upper price limit.
The process begins when the government imposes an upper limit on the price of sugar. So, the first step is: \[ B = \text{Government imposes an upper limit on the price of sugar} \]
Step 2: Excess demand is created.
When the price is fixed below equilibrium price, consumers demand more sugar. But producers supply less sugar at the lower price. So, the second step is: \[ A = \text{There will be excess demand for sugar at that price} \]
Step 3: Shortage appears in the market.
Because demand is greater than supply, shortage occurs. So, the third step is: \[ D = \text{This may lead to a shortage of sugar in the market} \]
Step 4: Rationing is introduced.
To manage shortage, the government may distribute sugar through rationing. So, the fourth step is: \[ C = \text{Sugar is distributed to everyone through a system of rationing} \]
Step 5: Final sequence.
The correct sequence is: \[ B \rightarrow A \rightarrow D \rightarrow C \] Hence: \[ \boxed{\text{(C) B, A, D, C}} \]