If the price for grain set by the market is $3.50 a bushel, but the government sets a price of $5...
Question:
If the price for grain set by the market is $3.50 a bushel, but the government sets a price of $5 a bushel,
A. a shortage of grain will result.
B. farmers will hold off on planting the new crop until the market arrives at a $5 price.
C. the government will have to purchase the surplus in order to maintain the higher price.
D. demand will increase until a new market equilibrium of $5 is reached.
Price Intervention:
There are occasions where the government intervenes in the market by influencing prices. The two common types of price interventions include price floor and price ceiling.
Answer and Explanation: 1
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View this answerThe answer is B).
The government sets a price floor that is above the equilibrium price, so there will be a surplus. That is, the quantity supplied...
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Price Ceiling in Economics | Definition, Types & Examples
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Chapter 3 / Lesson 67
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Learn the price ceiling definition in economics. See a price ceiling example to compare the difference between a price ceiling vs price floor.
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