Refer to the accompanying figure for the next two questions.

-The accompanying figure describes the market for gasoline in a local community.If the government were to place a price floor at P₁,predict the resulting surplus or shortage.
A) There would be a shortage of 75,000 units.
B) There would be a surplus of 75,000 units.
C) There would be neither a shortage nor a surplus.
D) There would be a shortage of 150,000 units.
E) There would be a surplus of 150,000 units.

Question

Refer to the accompanying figure for the next two questions.
 
-The accompanying figure describes the market for gasoline in a local community.If the government were to place a price floor at P₁,predict the resulting surplus or shortage.
A) There would be a shortage of 75,000 units. 
B) There would be a surplus of 75,000 units. 
C) There would be neither a shortage nor a surplus. 
D) There would be a shortage of 150,000 units. 
E) There would be a surplus of 150,000 units.

Quizplus · Accepted Answer

A price floor set at P₁ would mean that gasoline cannot be sold below that price. This creates a situation where the quantity demanded (Qd) decreases while the quantity supplied (Qs) increases, resulting in a surplus of gasoline. However, since we do not know the exact demand and supply curves or the quantities at P₁, we cannot accurately determine the amount of surplus or shortage. Therefore, the correct answer is that there would be neither a shortage nor a surplus.

Refer to the Accompanying Figure for the Next Two Questions