suppose the price control on sugar are lifted ,how will it effect the price and quantity consumed of sugar ?
Suppose, that the government has initially imposed a price ceiling on sugar. Thereby, fixing the maximum price that can be charged in the market at . At this price. there is excess demand in the market which is given by.
Once the price ceiling is lifted, the market forces of demand and supply will work to restore equilibrium at point E. At this point the market price is given by and the equilibrium quantity is given by . Therefore, the price of sugar is higher than it was with the ceiling and also the quantity supplied is also higher than it was at the ceiling. However, as price of sugar rises with the removal of the ceiling, quantity of sugar demanded falls from to .