Drawing a price floor is simple.
A price floor set above the equilibrium price is binding.
More than one of the above is correct.
A price floor must be higher than the equilibrium price in order to be effective.
For a price floor to be effective it must be set above the equilibrium price.
The government is inflating the price of the good for which they ve set a binding price floor which will cause at least some consumers to avoid paying that price.
The result is a quantity supplied in excess of the quantity demanded qd.
Price floors prevent a price from falling below a certain level.
What makes a price floor price ceiling binding effective.
A binding price floor is a required price that is set above the equilibrium price.
Trading at a lower price is illegal.
When quantity supplied exceeds quantity demanded a surplus exists.
If a country has the comparative advantage in producing wooden furniture then with free trade.
T f a price floor is a legal minimum on the price at which a good or service can be sold.
When a price floor is set above the equilibrium price as in this example it is considered a binding price floor.
If a price floor is not binding then a.
A price ceiling set above the equilibrium price is not binding.
If it s not above equilibrium then the market won t sell below equilibrium and the price floor will be irrelevant.
If the equilibrium price of gasoline is 3 00 dollars per gallon and the government places a price ceiling on the gasoline of 4 00 dollars per gallon the result will be a shortage of gasoline.
It has no legal enforcement mechanism.
Simply draw a straight horizontal line at the price floor level.
An example of price ceiling.
A price floor is a government or group imposed price control or limit on how low a price can be charged for a product good commodity or service.
This has the effect of binding that good s market.
True t f to be binding a price floor must be set above the equilibrium price.
Price ceilings prevent a price from rising above a certain level.
This graph shows a price floor at 3 00.
The equilibrium price is above the price floor.
Higher than the equilibrium price.
To be binding a price floor must be set at a price.
A price floor must be set above equilibrium a price ceiling must be set below equilibrium.
When a price ceiling is set below the equilibrium price quantity demanded will exceed quantity supplied and excess demand or shortages will result.