When the government imposes a binding price floor, it causes ___________.a. the supply curve to shift to the left. b. the demand curve to shift to the right. c. a shortage of the good to develop. d. a surplus of the good to develop.
Business · High School · Tue Nov 03 2020
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When a government imposes a binding price floor, it causes:
d. A surplus of the good to develop.
A price floor sets a minimum price above the equilibrium price determined by market forces. When this floor is above the equilibrium, it creates a situation where the quantity supplied exceeds the quantity demanded at that higher price. This results in a surplus of the good as producers are willing to supply more at the higher price than consumers are willing to purchase.