Principles of Microeconomics, 7th Edition

Published by South-Western College
ISBN 10: 128516590X
ISBN 13: 978-1-28516-590-5

Chapter 6 - Part II - Supply, Demand, and Government Policies - Quick Check Multiple Choice: 1


d. a surplus of the good to develop

Work Step by Step

A price floor is a legal minimum on the price at which a good must be sold. Therefore, a binding price floor sets the price above the existing equilibrium price. At this new price, the quantity supplied is greater than the quantity demanded of the good, so there is a resulting surplus of the good. For example, consider the case of a minimum wage. When a minimum wage is imposed above the existing wage, more people are now willing to work, but firms are unable to hire more people at the new higher wage, so there is a resulting surplus of workers.
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