Figure 4-8 Figure 4-8 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month.
-Refer to Figure 4-8. Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the value of consumer surplus after the imposition of the price floor?

Question

Figure 4-8  Figure 4-8 shows the market for apartments in Springfield. Recently, the government imposed a rent ceiling of $1,000 per month.
-Refer to Figure 4-8. Suppose that instead of a rent ceiling, the government imposed a price floor of $2,000 per month for apartments. What is the value of consumer surplus after the imposition of the price floor?

Quizplus · Accepted Answer

A price floor set above the equilibrium price reduces consumer surplus because it leads to a higher price than consumers are willing to pay, reducing the quantity demanded. The consumer surplus is calculated based on the area below the demand curve and above the price floor, up to the quantity demanded.

Figure 4-8 Figure 4-8 Shows the Market for Apartments