Suppose that a market is initially in equilibrium.Then the government imposes a price floor above the equilibrium price.Which of the following will occur in the absence of a black market?
A) The market will remain in equilibrium.
B) The quantity sold will drop.
C) The quantity demanded will increase.
D) The quantity supplied will decrease.
E) An excess demand will develop.

Question

Quizplus · Accepted Answer

A price floor above the equilibrium price creates a situation where the price is artificially high, which disincentivizes demand and incentivizes an increase in supply. As a result, the quantity sold will drop, and a surplus of goods will be created, leading to excess supply.

Suppose That a Market Is Initially in Equilibrium