Question

You are a senator from Kansas who wants to help farmers. You have worked to encourage the passage of a law that would impose a binding price floor on wheat. What would you expect your critics to say?

Answer 1

Answer:

Critics would point out that binding price floors cause excess supply of the good.

Explanation:

A binding price floor is a minimum price on a good or service, imposed by the government, that is above the market price. Binding price floors are common in agricultural policy, and in wage policy (minimum wage).

A binding price floor causes excess supply because it makes suppliers produce more than the amount consumers demand. Because the price cannot go any lower where supply and demand meet, this excess supply continues to exist, and in the case of agricultural products, is often stored for future times, or even left to rot away.