A nonbinding price floor has which of the following consequences?
A) There will be downward pressure on prices until quantity demanded equals quantity supplied.
B) There will be upward pressure on prices until quantity demanded equals quantity supplied.
C) There are no consequences to a nonbinding price floor.
D) The quantity demanded will always exceed the quantity supplied.
E) The quantity demanded will always be smaller than the quantity supplied.

Question

Quizplus · Accepted Answer

A nonbinding price floor is a price that is set above the equilibrium price but is not effective in preventing the market price from reaching the equilibrium price. In this case, there are no consequences because the market price is not affected by the price floor. The market will continue to clear at the equilibrium price where quantity demanded equals quantity supplied.

A Nonbinding Price Floor Has Which of the Following Consequences