Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Shortage of goods
B
Surplus of goods
C
No change in the market
D
Increase in demand
Understanding the Answer
Let's break down why this is correct
Answer
When a price floor is set above the market equilibrium price, it means that the minimum price for a product is higher than what buyers and sellers naturally agree on. This can lead to a surplus of goods because producers will want to supply more at the higher price, but consumers may not want to buy as much. For example, if the equilibrium price for bread is $2, but a price floor is set at $3, bakers will make more bread since they can sell it for more, but fewer people may buy it at that price. As a result, there will be excess bread that goes unsold, leading to wasted resources. Overall, a price floor above equilibrium disrupts the normal balance of supply and demand in the market.
Detailed Explanation
When a price floor is set above the market price, sellers want to sell more goods at the higher price. Other options are incorrect because Some might think a price floor causes a shortage; It's easy to think that a price floor won't change anything.
Key Concepts
market equilibrium
Topic
Price Floors and Market Impact
Difficulty
easy level question
Cognitive Level
understand
Ready to Master More Topics?
Join thousands of students using Seekh's interactive learning platform to excel in their studies with personalized practice and detailed explanations.