Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It would increase demand for the good since it is now cheaper.
B
It would decrease demand for the good as it becomes more expensive than the equilibrium price.
C
It would have no effect on consumer behavior regardless of the price floor.
D
It would encourage consumers to substitute the good for more expensive alternatives.
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, meaning it cannot be sold for less than this price. When a price floor is implemented in a competitive market, it usually leads to higher prices for consumers. For example, if the government sets a price floor on milk, consumers will have to pay more than they previously did. As a result, some consumers may decide to buy less milk or look for alternatives, like plant-based drinks, to save money. This change in behavior is because higher prices can make consumers rethink their spending and adjust their choices.
Detailed Explanation
A price floor sets a minimum price. Other options are incorrect because Some might think a lower price means more people will buy it; It's a common mistake to think price changes don't matter.
Key Concepts
Price floor
Consumer behavior
Price controls
Topic
Price Floors in Competitive Markets
Difficulty
hard level question
Cognitive Level
understand
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