Suppose the demand for eggs is inelastic and that the market-clearing price is $1.50 per dozen.Now suppose the government imposes a minimum price of $2.00 per dozen.Why might the government implement such a policy?
A)to make consumers better off
B)to increase the incomes of egg farmers
C)to increase excess demand in the egg market
D)to reduce excess supply in the egg market
E)to decrease tax revenues from egg farmers

Question

Quizplus · Accepted Answer

The government may implement a minimum price of $2.00 per dozen to increase the incomes of egg farmers who may be facing financial difficulties due to low market prices. This policy will create a surplus of eggs and reduce consumer welfare since demand is inelastic, and consumers may need to pay higher prices. Therefore, options A, C, D, and E are incorrect.

Suppose the Demand for Eggs Is Inelastic and That the Market-Clearing