Asked by
Buttered Toast
on Oct 26, 2024
Verified
A binding price floor causes:
A) a shortage in the market.
B) a surplus in the market.
C) an efficient use of resources.
D) equilibrium.
Binding Price Floor
A binding price floor is a government-imposed limit on how low a price can be charged for a product or service, set above the equilibrium price, leading to potential surpluses.
Surplus
The excess of supply over demand in a market, resulting in lower prices.
Shortage
A situation in which demand for a product exceeds its supply in a market.
- Master the notion of price floors and how they affect equilibrium in the market.
- Ascertain the outcomes of implementing binding and nonbinding price floors on the dynamics of supply and demand, along with their impact on market surplus or shortage.
Verified Answer
RF
Learning Objectives
- Master the notion of price floors and how they affect equilibrium in the market.
- Ascertain the outcomes of implementing binding and nonbinding price floors on the dynamics of supply and demand, along with their impact on market surplus or shortage.