Question

After a binding price floor becomes effective, a a. smaller quantity of the good is bought and sold. b. a larger quantity of the good is demanded. c. a smaller quantity of the good is supplied. d. All of the above are correct

Answer 1

Answer:

a. smaller quantity of the good is bought and sold.        

Explanation:

           A binding price floor may be defined as the required price which the government sets on a good or the goods at the price which is above equilibrium. Now as the government sets that the prices should not drop below the required price, this price binds for the market to sell the good in that price.

          Now when a binding price floor is effective, a number of smaller quantity of goods is bought and is sold.

Hence the correct option is (a).