A government-imposed price floor above the market price of milk would increase consumers' expenditures on milk only if
A)demand is elastic
B)supply is inelastic
C)demand falls
D)demand is inelastic
E)supply is unit elastic

Question

Quizplus · Accepted Answer

If demand is inelastic, consumers will still purchase milk despite the higher price, thus increasing their expenditures on milk. If demand is elastic, consumers will switch to substitute products, and their expenditures on milk will decrease. Supply elasticity is not directly relevant to this question.

A Government-Imposed Price Floor Above the Market Price of Milk