Asked by Johnna-Bryante Rayphen on Jun 19, 2024
Verified
Refer to Scenario 6-1. If the government set a price floor at $7, would there be a shortage or surplus, and how large would be the shortage/surplus?
Price Floor
A minimum price set by the government for certain goods and services, intended to prevent prices from dropping too low.
Shortage/Surplus
A situation in the market where the amount of a product that consumers want to buy is greater than the amount available (resulting in a shortage), or the available amount is more than what consumers want to purchase (leading to a surplus).
Demand Equation
A formula that calculates the amount of a product consumers are willing to buy based on its price, income levels, and taste and preferences among other factors.
- Examine the impact of price floors and price ceilings on market results.
- Determine market deficits and excesses resulting from governmental actions like price minimums and maximums.
Verified Answer
JN
Janet NarvaezJun 23, 2024
Final Answer :
A price floor set at $7 would not be binding, so there would be neither a shortage nor a surplus.
Learning Objectives
- Examine the impact of price floors and price ceilings on market results.
- Determine market deficits and excesses resulting from governmental actions like price minimums and maximums.