A Price Floor Policy Establishes a Minimum Price for a Market

Multiple Choice

A price floor policy establishes a minimum price for a market, and the policy is said to be binding if the market equilibrium price is less than the floor price. What impact does a binding price floor have on the market outcome?

A) Excess supply
B) Excess demand
C) Shortage
D) No impact, and the market price and quantity equal their equilibrium values