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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.

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