JAMB Economics 1982 Question 7

Question 7

Price Determination

The control price for a carton of beer in Nigeria is N7.20. But a carton of beer is sold in parts of the country for as much as N15.00 The cause of this exorbitant price is that

  1. A.there is a Government ban on the importation of beer
  2. B.beer distributors want more profit
  3. C.Nigeria is a large country
  4. D.middlemen hoard beer
  5. E.the demand for beer exceeds the supply.
Show the answer and explanation

Answer: E (the demand for beer exceeds the supply.)

Explanation

A control price set below equilibrium creates a shortage: demand exceeds supply, so buyers bid the price up on the black market.