ECONOMICS
PRICE CEILINGS AND FLOORS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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raise prices
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create a new product
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offer a sale on the item
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None of the above
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Detailed explanation-1: -If a surplus exist, price must fall in order to entice additional quantity demanded and reduce quantity supplied until the surplus is eliminated. If a shortage exists, price must rise in order to entice additional supply and reduce quantity demanded until the shortage is eliminated.
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: -What is the quickest way to eliminate a surplus? Reduce the price of the good.
Detailed explanation-4: -The market attempts to resolve the surplus by pushing the price down until it is at its equilibrium. A lower price will reduce the quantity supplied and increase the quantity demanded.