If the legal price floor is set below the equilibrium price in a market,then a surplus will develop in the market.

Question

Quizplus · Accepted Answer

If the legal price floor is set below the equilibrium price, it will not lead to a surplus but rather have no impact on the market. A price floor below the equilibrium price is not binding, as the market is already operating at a higher equilibrium price, and therefore the legal price floor has no effect on the market. A surplus would only occur if the price floor was set above the equilibrium price.

If the Legal Price Floor Is Set Below the Equilibrium