If the government removes a binding price floor from a market, then the price re
ID: 1219407 • Letter: I
Question
If the government removes a binding price floor from a market, then the price received by sellers will % decrease, and the quantity sold in the market will decrease 0 decrease, and the quantity sold in the market will increase Q increase, and the quantity sold in the market will decrease Q increase, and the quantity sold in the market will increase A price floor is binding when it is set Q above the equilibrium price, causing a shortage above the equilibrium price, causing a surplus below the equilibrium price causing a shortage below the equilibrium price, causing a surplus The imposition of a binding price floor on a market causes quantity demanded to be greater than quantity supplied less than quantity supplied equal to quantity supplied Both a) and b) are possibleExplanation / Answer
9. If the government removes a binding price floor from a market, then the price received by sellers will increase,and the quantity sold in the market will decrease. As you know binding binding price floor set the market price below equilibrium price,so when it is removed seller will be better off by receiving higher price but buyer will be worse off by this as they have to pay higher price.Due to this demand will fall and subsequently quantity sold will fall.
10. A price floor is binding when it is set below the equilibrium price, causing a shortage in the supply as producers are unwilling to produce at a lower price.
11. The imposition of a binding price floor on a market causes quantity demanded to be greater than quantity supplied, at lower price buyers demanded more but producers are unwilling to produce at a lower price.