A price floor above equilibrium will cause a larger surplus when demand is _____ and supply is _____.
A)elastic;inelastic
B)inelastic;inelastic
C)elastic;elastic
D)perfectly inelastic;elastic

Question

Quizplus · Accepted Answer

When demand is elastic and supply is also elastic, a price floor above equilibrium will have a greater impact on the surplus. This is because with a higher price, the quantity demanded will decrease while the quantity supplied will increase, creating a larger gap between the two. This results in a larger surplus.

A Price Floor Above Equilibrium Will Cause a Larger Surplus