If a binding price floor is imposed on the video game market, then
A)the demand for video games will decrease.
B)the supply of video games will increase.
C)a surplus of video games will develop.
D)a shortage of video games will develop.

Question

Quizplus · Accepted Answer

A binding price floor, set above the equilibrium price, leads to a surplus because it increases the price, causing producers to supply more than consumers are willing to buy at that price. Demand does not decrease; rather, it is not met at the higher price. Supply does not necessarily increase; it's the willingness to supply at the higher price that increases, leading to a surplus. A shortage would occur with a binding price ceiling, not a floor.

If a Binding Price Floor Is Imposed on the Video