A government will create a surplus in a market when it:

Question

Quizplus · Accepted Answer

When a government sets a price floor above the equilibrium price, it creates a surplus in the market because there will be more supply than demand at the higher price. This means that producers will produce more than consumers are willing to buy, and the excess supply will accumulate as a surplus. The government may choose to purchase this surplus, but it will still result in a higher quantity supplied than demanded in the market.

A Government Will Create a Surplus in a Market When