After a binding price floor becomes effective,a
A)smaller quantity of the good is bought and sold.
B)a larger quantity of the good is demanded.
C)a smaller quantity of the good is supplied.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

A binding price floor sets a minimum price above the equilibrium price. As a result, the quantity demanded decreases as consumers are not willing to pay the higher price, while the quantity supplied increases as producers offer more at the higher price. This creates a surplus of the good, causing transactions to decrease and leading to a smaller quantity of the good being bought and sold. Thus, option A is the correct choice.

After a Binding Price Floor Becomes Effective,a