Logout Open In App
Open In App
Warning: foreach() argument must be of type array|object, bool given in /var/www/html/web/app/themes/studypress-core-theme/template-parts/header/mobile-offcanvas.php on line 20

Chapter 3: Q 9. (page 78)

What would be the impact of imposing a price floor below the equilibrium price?

Short Answer

Expert verified

A price floor below equilibrium has no effect.

Step by step solution

01

Step 1. Define equilibrium price.

The equilibrium price is the point at which the supply of commodities equals the demand for them.

02

Step 2. What effect would establishing a price floor below the equilibrium price have?

A price ceiling is refers to a legal maximum price, but as long as the equilibrium price is lower than the former, the market will choose it. To put it another way, a price floor below equilibrium has no effect.

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

When the price is above the equilibrium, explain how market forces move the market price to equilibrium. Do the same when the price is below the equilibrium.

What is the relationship between quantity

demanded and quantity supplied at equilibrium? What is the relationship when there is a shortage? What is the relationship when there is a surplus?

Does a price ceiling increase or decrease the number of transactions in a market? Why? What about a price floor?

Explain why the following statement is false: “In the goods market, no seller would be willing to sell for less than the equilibrium price.”

Does a price ceiling attempt to make a price higher or lower?
See all solutions

Recommended explanations on Economics Textbooks

Taxation Economics

Read Explanation
View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free