ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Price floors prevent a price from falling below a certain level. When a price floor is set above the equilibrium price, quantity supplied will exceed quantity demanded, and excess supply or surpluses will result.

Detailed explanation-2: -A surplus exists when the price is above equilibrium, which encourages sellers to lower their prices to eliminate the surplus. A shortage will exist at any price below equilibrium, which leads to the price of the good increasing.

Detailed explanation-3: -Regardless of the cause, we see in Figure 3.6b that a price above equilibrium will result in quantity supplied being greater than quantity demanded. This excess supply is also known as a surplus. There are too many sellers who are enticed by the high price, and not enough buyers.

Detailed explanation-4: -Consumer surplus always increases as the price of a good falls and decreases as the price of a good rises.