Question

Typical of price ceilings, the ancient Indian political philosopher known as Kautilya advocated controls to protect against merchant greed, fixing a profit of 5% over the fixed price of local commodities, including textiles. If severe weather were to render the textile market more uncertain (e.g., if transportation routes were damaged), what would reasonably happen

Answer 1

Fewer merchants would be willing to supply textiles.

Step-by-step explanation:

Price ceilings are the maximum price that is set for commodities in a particular market by the government. It is aimed at protecting buyers from excessive price exploitation by sellers.

In the given scenario the price of commodities was set at 5% above fixed price of local communities. This means sellers can make a maximum of 5% on any sale.

However severe weather rendered the textile market more uncertain.

The result will be that sellers will be less willing to provide commodities as they are not able to push the added cost to the buyer.