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Sav [38]
4 years ago
11

Price floors and price supports set a minimum price below which a good or service cannot be sold. Minimum wage laws and agricult

ural price supports are common examples of such price controls. When price floors are used to keep prices above free-market levels in the agricultural industry, which of the following outcomes are common? Check all that apply.
A. Overinvestment in the agricultural industryB. A decrease in the future supply of agricultural goodsC. A surplus of agricultural goodsD. A problem of disposal of surplus agricultural goods
Business
1 answer:
Sergeu [11.5K]4 years ago
7 0

Answer:

C. A surplus of agricultural goods

Explanation:

Un-intervened markets are at equilibrium where Market Demand = Market Supply. Market Supply curve is upward sloping, due to price - supply direct relationship. Market demand curve is downward sloping, due to price - demand inverse relationship. Both curves intersect at equilibrium.

Price floor is minimum mandated price by government, below which a good cant be sold in the markets. It is usually set above market price, to protect the interest of sellers. Eg : Minimum Support price, of agricultural goods, set for protecting interests of sellers (farmers) from volatile prices.

This mandate set artificially high price : leads to supply being more than demand, as supply is directly & demand is inversely related to price. So, supply > demand implies that agricultural goods are at surplus in markets.

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NOTE: If you need to extend the explanation given, you can make a comment or add a new question. I will be very pleased to help you.

3 0
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