Economics 9708 · AS & A Level · Maximum and minimum prices

Maximum and minimum prices — practice question

The diagram indicates the equilibrium price (OP) and quantity (OQ) in the maize market. The government aims to reach a target price of OP1. What would happen if the government intervenes in the market and raises demand by Q-Q1?

  • AThe original equilibrium price will continue to operate.
  • BThe equilibrium price will be at the target price.
  • CThe equilibrium price will be OP2.
  • DThe equilibrium price will be between the target price and the original equilibrium price.

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