Explain how a price ceiling imposed by governments in major rice-producing countries might affect world rice markets.

A price ceiling is when a maximum price is set on a good. For a price ceiling to be effective, it must be set below the free-market price. This causes excess demand (a shortage), which might cause people to switch to alternatives to rice - though this might not be possible in countries where rice is a staple food - or rice might become imported from other markets perhaps in a different country. This potential increase in demand for rice in another country would result in an increase in price there.

However, the effect on this price also depends upon the accessibility of obtaining rice from a different country, as well as how the law is enforced in the original country. If the price ceilings are not enforced properly, the effect on world rice markets might not be noticeable.

Answered by Michael R. Economics tutor

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