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JAMB Economics 1998 Question 13

Question 13

Price Determination

In the diagram above, the price P2 in price control situation, is referred to as

Diagram for this question
  1. A.minimum price
  2. B.mark-up price
  3. C.maximum price
  4. D.mark-down price.
Show the answer and explanation

Answer: A (minimum price)

Explanation

Demand and supply meet at P1. P2 is fixed above this equilibrium, and a legal price set above equilibrium, below which sales may not take place, is a minimum price.