Suppose the Government Decides to Eliminate a Binding Price Floor

question 6

Multiple Choice

Suppose the government decides to eliminate a binding price floor that it had previously imposed on a particular good. It can be expected that

• A) the price would increase, the quantity demanded would decrease and the quantity supplied would increase.
• B) the price would decrease, the quantity demanded would increase and the quantity supplied would decrease.
• C) the price would increase, the quantity demanded would increase and the quantity supplied would decrease.
• D) the price would decrease, the quantity demanded would decrease and the quantity supplied would increase.
• E) no changes would take place.

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Scatter Diagram

A graphical representation that shows the relationship between two variables, plotted as points on a Cartesian coordinate system.

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A statistical model that assumes a linear relationship between input variables (independent) and a single output variable (dependent).

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A statistical method used to determine the line of best fit by minimizing the sum of squares of the vertical distances of the points from the line.