price fixed above the equilibrium is to

ECONOMICS
WAEC 2011

price fixed above the equilibrium is to

  • A. protect agricultural producers
  • B. discourage agricultural producers
  • C. lower the price of agricultural producers
  • D. favour consumers

Correct Answer: A. protect agricultural producers

Explanation

When prices are set above equilibrium, it means more suppliers or producers will be willing to sell their goods because of the high prices. This will invariably lead to a surplus of goods in the market resulting in excess supply. This is usually done to protect and encourage production, as producers will be willing to produce and supply to the markets in large quantities when the price is high.



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