Suppose the government sets a price floor that is above the equilibrium price for a given...

Suppose the government sets a price floor that is above the equilibrium price for a given good. d)It can be said that at the price floor,

a)although sellers are selling all of the product that they desire at this price, the consumers are not able to buy all that they desire.

b)although consumers are purchasing all of the product that they desire at this price, the sellers are not selling all that they desire.

c)both sellers and buyers are satisfied with the quantity that is being exchanged.

d)both sellers and buyers are exchanging the equilibrium quantity of this good.

e)b and d

Solutions

Expert Solution

It is not perfectly told in the question what is to be done. Guessing it is objective type and choose one.

Only option (a) is correct. Because when price floor is set, the price goes above the equilibrium price. So the consumers cannot buy the desired quantity. At this position it can be seen that there is surplus quantity of good that is not demanded. That is an excess supply. A surplus.

Shown the same in figure below:

Rahul Sunny answered 1 year ago

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