The table given below reports the quantity demanded and supplied of a commodity at different prices in a market.Table 3.5

-Refer to Table 3.5. If government imposes a price floor of $2:
A)the price floor will not have an effect.
B)the price will fall to $1 because producers will be forced to incur losses.
C)demand will increase.
D)a surplus will result equal to 20 units.
E)a shortage will result equal to 20 units.

Question

The table given below reports the quantity demanded and supplied of a commodity at different prices in a market.Table 3.5
 
-Refer to Table 3.5. If government imposes a price floor of $2:
A)the price floor will not have an effect. 
B)the price will fall to $1 because producers will be forced to incur losses. 
C)demand will increase. 
D)a surplus will result equal to 20 units. 
E)a shortage will result equal to 20 units.

Quizplus · Accepted Answer

A price floor of $2 is higher than the equilibrium price of $1.50. As a result, the price floor will not have an effect on the market since the equilibrium price and quantity will not change. The quantity demanded will still be 80 units and the quantity supplied will still be 60 units, resulting in a market equilibrium with no shortage or surplus.

The Table Given Below Reports the Quantity Demanded and Supplied