Question

The government has set a price floor on bread. Manufacturers cannot sell loaves for less than $5.00, which is a dollar above the market price.

What will most likely result from this price control?

The quantity demanded for bread will decrease, and the quantity supplied will increase.
The quantity demanded and quantity supplied for bread will increase.
The quantity demanded for bread will increase,and the quantity supplied will decrease.
The quantity demanded and quantity supplied for bread will decrease.

Answer 1

Answer:

A. The quantity demanded for bread will decrease , quantity supplied will increase

Explanation:

Answer 2

Based on the fact that the new price floor is above the market price, The quantity demanded for bread will decrease, and the quantity supplied will increase.

What happens when a price floor is above the market price?

When this situation happens, it would entice suppliers to supply more of their goods in order to make a profit. Quantity supplied will therefore increase.

People will however feel that the good is now more expensive so less people will buy. This will lead to a decrease in quantity demanded.

In conclusion, option A is correct.

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