Whenever a price floor is imposed above equilibrium price, it is true that:
A)supply will increase due to a higher price and a surplus will result.
B)supply will increase due to a higher price until it just equals the quantity demanded.
C)demand will increase due to a higher price and a shortage will result.
D)demand will increase due to a higher price until it just equals the quantity supplied.
E)quantity supplied will exceed the quantity demanded.

Question

Quizplus · Accepted Answer

Whenever a price floor is imposed above equilibrium price, it creates a situation where the quantity supplied will be more than the quantity demanded. This is because the higher price incentivizes producers to increase production, while consumers reduce their demand due to the higher prices. The excess supply leads to a surplus in the market. Hence, option E is the correct answer.

Whenever a Price Floor Is Imposed Above Equilibrium Price, It