How does an effective price floor affect buyers and sellers? Why does the government enact price...

How does an effective price floor affect buyers and sellers? Why does the government enact price floors? Explain.

Expert Solution

A price floor is always set above the equilibrium price and that will increase the price paid by the consumer and decrease the demand. For the supplier the price will be higher quantity supplied will be higher but because the demand is low there will be lot of surplus goods in the market. In that case, government has to come in and buy the excess goods or it will lead to a dead weight loss in the market.

Government enact a price floor to ensure a better return for the producer and this is generally used for the agriculture products like milk, cereals etc.

Rahul Sunny answered 2 years ago

For a market to be competitive, why is it important that there be buyers and sellers...

For a market to be competitive, why is it important that there be buyers and sellers and easy entry and exit?

what factors affect buyers demand for goods? what factors affect sellers supply of goods? how do...

what factors affect buyers demand for goods? what factors affect sellers supply of goods? how do supply and demand determine the price of a good and the quantity sold?

In general, a tax raises the price the buyers pay, lowers the price the sellers receive,...

In general, a tax raises the price the buyers pay, lowers the price the sellers receive, and reduces the quantity sold. Select one: True False Question 23 Not yet answered Marked out of 1.00 Flag question Question text Which of the following goods would you expect to have an elastic demand with respect to income? a. Restaurant meals b. Floor c. Gasoline Clear my choice Question 24 Not yet answered Marked out of 1.00 Flag question Question text Economists assume...

Why does a price ceiling create a black market? Why does a price floor create a...

Why does a price ceiling create a black market? Why does a price floor create a grey market?

f a price floor is a binding constraint on a market, then a. sellers cannot...

f a price floor is a binding constraint on a market, then a. sellers cannot sell all they want to sell at the price floor. b. the equilibrium price must be above the price floor. c. the quantity demanded must exceed the quantity supplied. d. buyers cannot buy all they want to buy at the price floor.

Suppose for the market for housing that both buyers and sellers expected the price to increase....

Suppose for the market for housing that both buyers and sellers expected the price to increase. Which of the following would result? Group of answer choices Price rises and quantity rises Price falls and quantity is unclear Price rises and quantity is unclear None of the above

“Taxes create a wedge between price buyers pay and price sellers sell, but the incidence of...

“Taxes create a wedge between price buyers pay and price sellers sell, but the incidence of a tax depends on the price elasticities of supply and demand, and NOT necessarily who the government requires to pay the tax from their pocket. Discuss this statement and provide an example that shows the tax burden is shared by both buyers and sellers “in some proportion, and not necessarily 50-50”.

A tax a. lowers the price buyers pay and raises the price sellers receive. b. raises...

A tax a. lowers the price buyers pay and raises the price sellers receive. b. raises the price buyers pay and lowers the price sellers receive. c. places a wedge between the price buyers pay and the price sellers receive. d. Both b) and c) are correct.

Why does price ceiling mean decrease quality? why does price floor mean Increase in quality?

In a market where there are many price-taking buyers and sellers, there are many possible equilibrium...

In a market where there are many price-taking buyers and sellers, there are many possible equilibrium prices. Each of these prices represents a Nash equilibrium for this market. True or False?

Question