If a binding price floor is in place and if the demand curve for the product shifts rightward,one consequence would be
A)an increase in the amount of excess demand.
B)a decrease in the amount of excess demand.
C)an increase in the amount of excess supply.
D)a decrease in the amount of excess supply.
E)a decrease in the quantity exchanged.

Question

Quizplus · Accepted Answer

If the demand curve shifts rightward, it means that there is an increase in consumer demand for the product. With a binding price floor in place, the price cannot adjust to clear the market. However, the increase in demand will lead to a decrease in excess supply because more consumers are willing to purchase the product at the higher price. Therefore, the answer is D, a decrease in the amount of excess supply.

If a Binding Price Floor Is in Place and If