Asked by Camryn Bergeron on Jun 05, 2024
Verified
Effective price floors keep market price
A) above the equilibrium price and create surpluses.
B) above the equilibrium price and create shortages.
C) below the equilibrium price and create surpluses.
D) below the equilibrium price and create shortages.
Equilibrium Price
The rate at which the volume of goods available meets the volume of goods sought.
Surpluses
The amount by which supply exceeds demand, often referring to goods, services or public finances.
Shortages
A situation where the demand for a product or service exceeds the supply available at a specific price.
- Digest the essential concepts of price ceilings and price floors as they apply to market economics.
- Discern the situations that provoke surpluses and shortages in the market environment.
Verified Answer
MR
Michele RamiirrezJun 10, 2024
Final Answer :
A
Explanation :
Effective price floors are set above the equilibrium price, leading to excess supply or surpluses because the higher price encourages producers to supply more of the good than consumers are willing to buy at that price.
Learning Objectives
- Digest the essential concepts of price ceilings and price floors as they apply to market economics.
- Discern the situations that provoke surpluses and shortages in the market environment.