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Chapter 4: Q. 11 (page 104)

Select the correct answer. A price floor will usually shift

a. demand

b. supply

c. both

d. neither

Illustrate your answer with a diagram.

Short Answer

Expert verified

d. neither

Step by step solution

01

Definition

A price floor is a lower limit imposed on the price of a product by the government. This limit is imposed to protect the sellers.

02

Explanation 

Neither. A change in demand or supply indicates that at any given price, more or less is demanded or provided. A price floor has no effect on the demand or supply curves. If the price floor is set higher than the equilibrium, the quantity supplied on the supply curve will exceed the quantity required on the demand curve, resulting in excess supply.

03

Conclusion

Option d is the right answer.

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