With a price floor:

Question

With a price floor:

Quizplus · Accepted Answer

A price floor is a minimum price set by the government to prevent the market price from falling below a certain level. This means that the market price cannot fall below the price floor, which leads to a surplus of goods. This surplus reduces consumer surplus as consumers are forced to pay higher prices and consume fewer goods. On the other hand, the increase in price benefits producers, which can lead to an increase or decrease in producer surplus depending on the elasticity of demand. Thus, with a price floor, consumer surplus falls and producer surplus can increase or decrease.

With a Price Floor