At the price ceiling there is a surplus of orange juice.
Quantity exchanged price floor.
Example breaking down tax incidence.
When a price floor is set above the equilibrium price as in this example it is considered a binding price floor.
The amount exchanged in the market will be limited by the smaller of the two quantities q d in this case.
Minimum wage and price floors.
At the price floor the quantity demanded is less than quantity supplied which is a surplus situation.
The result is a quantity supplied in excess of the quantity demanded qd.
A price floor is the lowest legal price a commodity can be sold at.
However a price floor set at pf holds the price above e 0 and prevents it from falling.
The quantity demanded at the price ceiling will equal the quantity.
The most common price floor is the minimum wage the minimum price that can be payed for labor.
Taxes and perfectly elastic demand.
The quantity demanded at the price ceiling will equal the quantity supplied.
The result of the price floor is that the quantity supplied qs exceeds the quantity demanded qd.
The effect of government interventions on surplus.
Taxes and perfectly inelastic demand.
In figure 5 5 a price floor the price floor is illustrated with a horizontal line and is above the equilibrium price.
When the price floor is set below the equilibrium.
At equilibrium the quantity demanded is 700 units.
There are units that are socially efficient to trade but aren t traded because their value is less than the price floor.
Price and quantity controls.
A price floor example.
Taxation and dead weight loss.
The intersection of demand d and supply s would be at the equilibrium point e 0.
Price floors are used by the government to prevent prices from being too low.
The quantity supplied at the price ceiling will equal the quantity exchanged.
Consequently at the price floor a larger quantity is supplied than is demanded leading to a surplus.
Percentage tax on hamburgers.
