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AVprozaik [17]
3 years ago
13

Supppose that the federal government places a binding price floor on coffee. To help support the price floor, the government pur

chases all coffeee that consumers do not buy. If the price floor remains in place for a number of years, what do you expect to happen to each of the following?
a. It will decrease.
b. It will increase.
c. It will remain the same.
Social Studies
1 answer:
andrey2020 [161]3 years ago
4 0

Answer:

A). It will decrease - 'the quantity of coffee demanded.'

B). It will increase - 'the quantity of coffee supplied by producers'

Explanation:

'Binding price floor' is demonstrated as the price greater than the equilibrium price set by the government to ensure that the prices of such products do not fall below a specific limit.

As per this definition, <u>the quantity of coffee demanded by the consumers will decrease while the quantity supplied(by producers) will increase if the binding price remains constant for several years</u>. This situation of decrease in the quantity demanded(due to hike in prices which is artificially made by the government) while an increase in quantity supplied(due to people reducing purchases as a consequence of hike in prices) which helps ensure a surplus in that good i.e. 'coffee' here.  

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