A price floor that sets the price of a good above market equilibrium will cause:
A) a decrease in quantity demanded of the good.
B) an increase in quantity supplied of the good.
C) a surplus of the good.
D) all of these.

Question

Quizplus · Accepted Answer

A price floor above market equilibrium will lead to a decrease in quantity demanded because consumers will demand less of the good at the higher price. At the same time, an increase in quantity supplied of the good will occur because producers will want to take advantage of the higher price. The combination of decreased demand and increased supply will result in a surplus of the good because there will be more supply than demand.

A Price Floor That Sets the Price of a Good