The following will occur when maximum price is fixed below the free market price EXCEPT that

Analyze the question: A maximum price (price ceiling) is set below the free market (equilibrium) price. We need the option that does NOT happen.

Concept: A price ceiling is a legal limit on how high a price can be charged. Examples in Nigeria include government controls on petrol or on essential goods. When it is set below equilibrium, it becomes binding and creates a shortage.

Step-by-step solution:

1. At the lower price, consumers want to buy more, so quantity demanded rises.
2. At the same lower price, producers are willing to supply less, so quantity supplied falls.
3. Quantity demanded is now greater than quantity supplied, which is excess demand (a shortage).

Now check each option:

• A. Black market will be encouraged. This occurs. Because of the shortage, some people sell illegally at higher prices.
• B. Excess demand will occur. This occurs, as shown above.
• C. Excess supply will occur. This does NOT occur. Excess supply (a surplus) happens when a minimum price is set above equilibrium, such as a price floor on agricultural produce.
• D. Rationing of commodities will occur. This occurs. Because of the shortage, the government or sellers must share out the limited goods through queues, coupons, or quotas.

Answer: The option that will NOT occur is C. excess supply will occur.

Exam tip: Remember the pair:

• Maximum price (ceiling) is below equilibrium → shortage (excess demand) → black market and rationing.
• Minimum price (floor) is above equilibrium → surplus (excess supply).

In "EXCEPT" questions, first work out what does happen, then pick the odd one out.