Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It leads to an increase in consumer demand for the product.
B
It may cause a surplus of the product due to decreased consumer purchasing.
C
It results in lower prices for consumers.
D
It has no effect on consumer behavior.
Understanding the Answer
Let's break down why this is correct
Answer
A price floor is a minimum price set by the government for a good or service, which means sellers cannot sell it for less than this price. When a price floor is implemented in a competitive market, it often leads to higher prices for consumers. For example, if the government sets a price floor on milk, consumers will have to pay at least that minimum price, even if the market price was lower before. This can cause some consumers to buy less milk or switch to other products that are cheaper. Overall, a price floor can reduce consumer choice and increase spending on certain goods.
Detailed Explanation
A price floor sets a minimum price for a product. Other options are incorrect because Some might think higher prices mean more people want to buy; It's a common mistake to think a price floor lowers prices.
Key Concepts
Consumer behavior
Price controls
Topic
Price Floors in Competitive Markets
Difficulty
medium level question
Cognitive Level
understand
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