Question

When a seller is forced to sell below the “reserve price”, Comment this with the reality in the supply market

Answer 1

When a seller is forced to sell the output below the Reserve price in that case, the quantity demanded would be greater than and the quantity supplied.

That is it would create shortage in the market. Due to to decline in price the quantity demanded will increase(law of demand) but the quantity supplied will decrease because at a lower price less number of forms would be supplying their output into the market.

For example, generally government imposes a price ceiling or, rent control on the apartment rental. As they are forced to reduce their rwnt. This forces market players to exit from the market hence further reduction in the market supply. Price ceiling leads to dead weight loss.

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