Question

If a binding price floor is imposed on the video game market, then:____.

a. the quantity demanded for video games will decrease.
b. the quantity supplied of video games will increase.
c. a surplus of video games will develop.
d. All of these answers are correct.

Answer 1

A binding price floor on the video game market will decrease the quantity demanded, increase quantity supplied, and result in a surplus of video games.

Step-by-step explanation:

A binding price floor is a minimum price set by the government above the equilibrium price in a market. When a binding price floor is imposed on the video game market:

• The quantity demanded for video games will decrease because the price is higher than what consumers are willing to pay.
• The quantity supplied of video games will increase because producers are incentivized to supply more at a higher price.
• A surplus of video games will develop because the quantity supplied exceeds the quantity demanded.

Therefore, option d. All of these answers are correct.

A price floor usually shifts the supply curve on the demand and supply diagram. It sets a minimum price and prevents the price from falling below that level, leading to a surplus in the market.

Answer 2

All of the above are correct.

Step-by-step explanation:

A price floor is when the government or an agency of the government sets the minimum price of a product. A price floor is binding if it is set above equilibrium price.

Because price is set above equilibrium price, quantity supplied would exceed quantity demanded and there would be a surplus.

Because price is set above equilibrium price, quantity demanded will decrease.