Suppose that the province of Ontario sets a price floor in the market for peaches.If the floor is set below the market-clearing price of peaches,the floor will cause a surplus of peaches.

Question

Quizplus · Accepted Answer

If the price floor is set below the market-clearing price, it will have no effect on the market as it will be lower than the equilibrium price. Therefore, there will be no surplus of peaches. If the price floor is set above the equilibrium price, it will create a surplus.

Suppose That the Province of Ontario Sets a Price Floor