Question

897/3100 Resources Consider the supply and demand model for romaine lettuce depicted in the accompanying graph. Suppose the government decides to impose a binding price floor on the market to aid farmers. a. Please place the end points of the price floor line segment to illustrate a binding price floor in the market. Market for Romaine Lettuce Quanlity b. After the price floor is implemented, what exists? neither both

Answer 1

A price floor is the minimum price that can be charged for a good this creates excess supply in the market since the sellers can charge a higher minimum price when the price floor is binding since the government has placed a binding price floor the minimum price will be lower than the price floor aiding the formers this creates excess supply