Suppose That a Market Is Initially in Equilibrium

question 28

Multiple Choice

Suppose that a market is initially in equilibrium.Then the government imposes a price floor above the equilibrium price.Which of the following will occur in the absence of a black market?

• A) The market will remain in equilibrium.
• B) The quantity sold will drop.
• C) The quantity demanded will increase.
• D) The quantity supplied will decrease.
• E) An excess demand will develop.

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Definitions:

Quantity Q

A specific quantity of goods or services, often used in discussions of supply and demand or economic models.

Producer Surplus

The difference between the amount producers are willing to accept for a good or service versus the amount they actually receive in the market.

Consumer Surplus

Consumer Surplus is the difference between what consumers are willing to pay for a good or service and what they actually pay, representing the benefit consumers receive from a transaction.

Producer Surplus

The difference between what producers are willing to sell a product for and the actual price they receive, representing their benefit or surplus.