A price floor is usually fixed

JAMB Economics 2024 142 views
Source: JAMB · 2024

A price floor is usually fixed

  1. at the equilibrium and causes no shortage
  2. above the equilibrium and causes shortage
  3. below the equilibrium and causes surpluses
  4. above the equilibrium and causes surpluses ✓
Explanation

A price floor is a minimum price set above equilibrium. Sellers want to supply more at this higher price.

Buyers want less because the price is too high. This mismatch creates a surplus of unsold goods.

Minimum wage is a common example of a price floor in the labor market.

Was this explanation helpful?

pastQuestions.ng pastquestions.ng