The lower limit imposed by the government on the price of a good or service is called price floor. It is the minimum price that the producers charge from the consumers for goods and services. Price floor is fixed above the market-determined equilibrium price (PF > P*). The concept of price floor can be explained with the help of the given figure. 
            
In the figure, the market supply and the market demand curves are shown as SS and DD respectively. The equilibrium price and quantity determined at the intersection of SS and DD  are p* and Q* respectively. When the government imposes price floor at PF, which is above the equilibrium price level, the firms are willing to supply QF quantity of the ~ood whereas the consumers demand only Q'F quantity of the good. As a result, there will be an excess supply of the good in the market at that price. In other words, imposition of price floor at PF gives rise to an excess supply in the market. 

When income of the buyers falls. their purchasing power falls. Thus, a fall in income decreases the demand for a normal commodity at a given price, and the demand curve shifts to the left. As a result equilibrium price and quantity will decrease. The impact of decrease in income can be shown with the help of a diagram.
    
In this diagram, quantity is shown on X axis and price is shown on Y axis. SS is the supply curve and DD is the demand curve. At the point of intersection (E) of DD and SS curves, the equilibrium price and equilibrium quantity are OP ₀ and OQ ₀  respectively. When the demand curve shifts leftwards from DD to D₁D₁ due to decrease in income, the equilibrium price decreases from OP₀ to OP₁ and the equilibrium quantity decreases from OQ ₀ to OQ₁

The equilibrium price of a good falls due to a leftward shift in the demand curve. It can be explained with the help of the diagram
 
In this diagram, quantity is shown on X axis and price is shown on Y axis. SS is the supply curve and DD is the demand curve. At the point of intersection of DD and SS curves, the equilibrium price and equilibrium quantity are OP₀ and OQ₀  respectively. When the demand curve shifts from DD to D₁D₁ the equilibrium price falls from OP₀ to OP₁ The equilibrium quantity also falls from OQ₀ to OQ₁ Thus, a leftward shift in the demand curve leads to a fall in the equilibrium price and quantity.

Effects of Changes in Demand
The effect on price when there is an increase or decrease in demand and the supply remains unchanged can be explained with the help of the diagram.
  
DD is the demand curve and SS is the supply curve, which remains fixed. The initial price is OP. If the demand increases from DD to D₁D₁ the price rises to OP₁ . Similarly, with the decrease in demand from DD to D₂D₂  the price falls to OP₂ 
Effects of Changes in Supply
The effect on price when there is an increase or decrease in supply and the demand remains unchanged can be explained with the help of the diagram 
 
SS is the supply curve and DD is the demand curve, which remains fixed. The initial price is OP. If the supply increases from SS to S₁S₁ the price falls to OP₁ . Similarly, with the decrease in supply from S₂S₂ to SS, the price rises to OP_2.

Equilibrium price is determined where market demand and market supply are equal. We can show this by the following table

In the table, when', the price of the good is very less, i.e. Rs 1 per unit then its demand is very high (100 units). However, no seller is ready to sell on this price and hence, supply is zero. Excess demand creates competition among the buyers and pushes the price up. When price is Rs 5 per unit, the quantity demanded is 60 units while quantity supplied is 40 units. Again, there is excess demand by 20 units. Price would continue to increase. When price is Rs 8 per unit, the quantity demanded is equal to the quantity supplied at 50 units. This price is called Equilibrium Price.
Similarly, when the price of the good is Rs 20 per unit then its supply is very high (100 units). However, no buyer is ready to buy on this price and hence, demand is zero. Excess supply Creates competition among the sellers and pulls the price down. When price is Rs 10 per unit, the quantity supplied is 60 units while quantity demanded is 30 units. Again, there is excess supply by 30 units. Price would continue to fall.

(i) If the price prevailing in the market is above the equilibrium price, it implies that there is an excess supply of a good. Excess supply refers to a situation when quantity demanded is less than the quantity supplied at given prices. It creates competition among the sellers and causes the price to fall. Marginal sellers will leave the market leading to fall in supply. This fall in supply will continue up to the point where it is equal to the market demand.
(ii) If the price prevailing in the market is below the equilibrium price, it implies that there is an excess demand for the good. Excess demand refers to a situation when quantity demanded is more than the quantity supplied at given prices. Excess demand creates competition among buyers and pushes the price up. New firm will enter the market leading to an increase in supply. This increase in supply will continue up to the point where it is equal to the market demand.

Market for a good is in equilibrium only when the demand for the good is equal to the supply of the good The main causes of an increase in demand include increase in the prices of substitute goods, decrease in the prices of complementary goods, increase in income and positive changes in hobbies.The chain of effects of an increase in demand can be explained with the help of the following numerical example:  

In the table above, the market is in equilibrium at price of Rs 5. At this price quantity demanded is equal to the quantity supplied at 50 units. Suppose at the price of Rs 5, demand increases from 50 to 80 units (say, due to increase in consumers' income), while supply remains the same at60 units. This gives rise to a excess demand of 30 units (80 - 50). Excess demand creates competition among the buyers and pushes the price 'up. The price, therefore, increases from Rs 5 to Rs 6. A rise in price induces the buyers to buy less, and thus, decreases the quantity demanded from 80 to 75 units. Also, arise in price induces the sellers to sell more, and thus, increases the quantity supplied from 50 to 60 units. These changes continue till price rises to Rs 7, where quantity demanded is again equal to the quantity supplied at 70 units. Thus, the new equilibrium price and quantity are Rs 7 and 70 units respectively. Both equilibrium price and equilibrium quantity have increased.

The main causes of a decrease in demand curve include decrease in the prices of substitute goods, increase in the prices of complementary goods, decrease in income and negative changes in hobbies. A decrease in the demand or a leftward shift in the demand curve leads to the situation of excess supply at the given price. Since the firms are not able to sell what they produce, excess supply creates competition among the sellers and pulls price down. Thus, a decrease in demand decreases both the equilibrium price and the equilibrium quantity 
     
In the diagram, when the demand curve shifts leftwards from DD to D₁D₁ excess supply is created (AE₀) at price OP₀ Since there is competition among the sellers due to excess stock, the price will decrease. Decrease in price increases the quantity demanded (from A to E₁) and decreases the quantity supplied (from E₀ to E₀).These changes continue till price rises to OP₁ . OP₁ is the new equilibrium price and OQ₁  is the new equilibrium quantity. 

The upper limit imposed by the government on the price of a good or service is called price ceiling. It is the maximum price that the producers can charge from the consumers for goods and services. Price ceiling is generally imposed on necessary items like wheat, rice, kerosene, sugar, etc. It is fixed below the market-determined equilibrium price (P_C < P*) since at P*, some sections of the population are not able to afford these goods and services. The concept of price ceiling can be explained with the help of the given figure. 
                    
In the figure, the market supply and the market demand curves are shown as SS and DD respectively The equilibrium price and quantity determined at the intersection of SS and DD are P* and Q* respectively. When the government imposes price ceiling at P_C . which is lower than the equilibrium price level, the consumers demand Q_C quantity of the good whereas the firms are willing to supply only Q'c quantity of the good. As a result, there will be an excess demand for the good in the market at that price. In other words, imposition of price ceiling at P_c gives rise to an excess demand in the market Moreover, excess demand may lead to the creation of black market because some people may be willing to pay a higher price for the goods.

We will analyse the following two situations separately: (i) number of firm is fixed; and (ii) free entry and exit is permitted.
(i) When the number of firms is fixed the market supply curve is the sum total of supply curves of individual firm; it has a positive slope. The interaction of demand and supply curves determines the equilibrium price and quantity. With an increase in demand, equilibrium price and quantity increase: conversely, with a decrease in demand, equilibrium price and quantity fall.
(ii) If free entry and exit is permitted in a market, all the firms produce at their minimum average cost; the price line assumes the shape of a horizontal straight line. This price line itself becomes the market supply curve.

The decisions of consumers in the market are expressed through market demand schedule and market demand curve. The decisions of the producers. on the other hand, are expressed through market supply schedule and market supply curve. The decisions of consumers and producers are coordinated by the interaction of market demand and market supply. This is known as price mechanism.

An increase in import duty would cause the demand curve to shift backwards. As a result, the equilibrium price and equilibrium quantity of mobile phones would fall.