In 1 or 2 sentences, explain the effect of a price floor on the quantity of a good.

2 answers:

8 0

<span>It creates demand shortage. Demand shortage, in turn, creates supply shortage which causes a decrease in prices or producers will exit the market. </span>

ioda3 years ago

5 0

A price floor is the lowest legal price that a good can be sold at, and this is usually used by a government to prevent prices from being too low. The problem with instituting a price floor is that this can create a demand shortage, which in turn can produce a supply shortage. Eventually, this leads to a drop in price that causes producers to exit the market.

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Serial position effect -

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