Price Floor Flashcards
1
Q
What is the price floor?
A
A price floor is set by the government to guarantee producers a minimum income.
2
Q
What will happen if the price floor is higher than the market equilibrium price?
A
This will create a surplus which has to be managed, extra supply can be stockpiled and released gradually into market so it does not effect price significantly. 
3
Q
What are the causes of a shortage?
A
The causes of shortage are increase in demand, decrease in supply, and government intervention.
