If a binding price floor is imposed on the market for eBooks,then

Question

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When a binding price floor is imposed, it sets a minimum price for the product which may be higher than the market equilibrium price. This will discourage buyers as the price is now higher, and hence the demand will decrease. However, the higher price will incentivize the publishers to supply more eBooks to the market as they can now earn higher profits. This will cause a surplus of eBooks to develop as the supply is greater than the demand, resulting in excess inventory.

If a Binding Price Floor Is Imposed on the Market