Question

Assume there is a price floor imposed on a good which is above the equilibrium price. Which of the following changes would reduce the size of the surplus?
a. ​ An increase in demand.
b. ​ A decrease in demand.
c. ​ An increase in supply.
d. ​ Any of the above.

Answer 1

Answer:

Answer is option a, i.e. an increase in demand.

Explanation:

When the price floor is imposed on a given good which is found to be above the equilibrium price, the situation of surplus arises as the supply exceeds the demand. In this situation, in order to reduce the size of the surplus, the demand has to be increased. Therefore, the answer is option a, i.e. an increase in demand.