Asked by Cassie Trucchio on May 06, 2024
Verified
If a price floor is set below the equilibrium price,
A) quantity demanded will be less than quantity supplied.
B) there will be a surplus.
C) there will be a shortage.
D) the floor will be ineffective.
Price Floor
A government-imposed limit below which prices cannot fall, often used in agricultural markets.
Equilibrium Price
The price at which the quantity of goods demanded equals the quantity of goods supplied, leading to market stability.
Ineffective
Not producing the intended or desired effect.
- Determine the situations where price caps and bases prove to be effective or not.
Verified Answer
NB
Nicole BoldsMay 11, 2024
Final Answer :
D
Explanation :
When a price floor is set below the equilibrium price, it does not affect the market because the market price is already above the floor. Therefore, the price floor is ineffective.
Learning Objectives
- Determine the situations where price caps and bases prove to be effective or not.