The demand and supply schedules for lawn mowing are given below:
\begin{tabular}{lll}
Price & Quantity demanded & Quantity Supplied \
\hline$\$ 20$ & 0 & 12 \
$\$ 18$ & 2 & 10 \
$\$ 16$ & 2 & 8 \
$\$ 14$ & 3 & 6 \
$\$ 12$ & 4 & 4 \
$\$ 10$ & 5 & 2 \
$\$ 8$ & 6 & 0
\end{tabular}

Which of the following is a binding (in other words, effective) price floor in this market?

Choose 1 answer:
(A) $\$ 8$
(B) $\$ 0$
(C) $\$ 14$
(D) $\$ 12$
(E) $\$ 10$

Question

The demand and supply schedules for lawn mowing are given below:
\begin{tabular}{lll} 
Price & Quantity demanded & Quantity Supplied \
\hline$\$ 20$ & 0 & 12 \
$\$ 18$ & 2 & 10 \
$\$ 16$ & 2 & 8 \
$\$ 14$ & 3 & 6 \
$\$ 12$ & 4 & 4 \
$\$ 10$ & 5 & 2 \
$\$ 8$ & 6 & 0
\end{tabular}

Which of the following is a binding (in other words, effective) price floor in this market?

Choose 1 answer:
(A) $\$ 8$
(B) $\$ 0$
(C) $\$ 14$
(D) $\$ 12$
(E) $\$ 10$

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of a Binding Price Floor: A binding price floor is a minimum price set by the government above the equilibrium price, causing a surplus in the market. ‖ ‖ b ⋮ Identifying the Equilibrium Price: The equilibrium price is where the quantity demanded equals the quantity supplied. From the table, this occurs at $12, where the quantity demanded and supplied are both 4. ‖ ‖ c ⋮ Determining the Binding Price Floor: A binding price floor must be higher than the equilibrium price. It is the lowest price among the options given that is above the equilibrium price and results in a surplus (quantity supplied is greater than quantity demanded). ‖ ‖ d ⋮ Analysis of Options: - (A) $8 is below the equilibrium price, so it is not a binding price floor. - (B) $0 is not a realistic price floor as it is below all listed prices. - (C) $14 results in a quantity demanded of 3 and a quantity supplied of 6, creating a surplus. - (D) $12 is the equilibrium price, so it cannot be a binding price floor. - (E) $10 is below the equilibrium price, so it is not a binding price floor. ‖ ∻Answer∻ ⚹ (C) $14 ⚹ ∻Key Concept∻ ⚹ Binding Price Floor ⚹ ∻Explanation∻ ⚹ A binding price floor is set above the equilibrium price and causes a surplus by forcing the price to be higher than what the market would naturally set, resulting in a quantity supplied that is greater than the quantity demanded. In this case, a price floor of $14 is effective because it is above the equilibrium price of $12 and results in a surplus. ⚹◊How would a binding price floor in this market impact the quantity demanded and supplied for lawn mowing services?⍭ Generate me a similar question◊$

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