This graph shows the market for fried bologna sandwiches.

What area(s) depict consumer surplus if a binding price floor is imposed on this market?

Choose 1 answer:
(A) $Y$
(B) $X$
(c) $U$
(D) $W$
(E) $T$
Related content
Minimum wage and price floors
9:06

Question

This graph shows the market for fried bologna sandwiches.

What area(s) depict consumer surplus if a binding price floor is imposed on this market?

Choose 1 answer:
(A) $Y$
(B) $X$
(c) $U$
(D) $W$
(E) $T$
Related content
Minimum wage and price floors
9:06

Accepted Answer

∻Solution∻ ‖ a ⋮ Definition of Consumer Surplus: Consumer surplus is the difference between what consumers are willing to pay for a good and what they actually pay. It is represented by the area between the demand curve and the price level up to the quantity demanded. ‖ ‖ b ⋮ Binding Price Floor: A binding price floor is set above the equilibrium price, causing a surplus in the market. In this case, the price floor is set at $P2$, which is above the equilibrium price at point $X$. ‖ ‖ c ⋮ Identifying Consumer Surplus: With a binding price floor at $P2$, the consumer surplus is the area between the demand curve and the price floor up to the quantity demanded at $P2$. This area is represented by the triangle formed by points $Y$, $V$, and the vertical axis at $P2$. ‖ ∻Answer∻ ⚹ (A) $Y$ ⚹ ∻Key Concept∻ ⚹ Consumer Surplus ⚹ ∻Explanation∻ ⚹ Consumer surplus is the area between the demand curve and the price level up to the quantity demanded. With a binding price floor at $P2$, the consumer surplus is the area between the demand curve and the price floor, represented by the triangle formed by points $Y$, $V$, and the vertical axis at $P2$. ⚹◊What impact would the imposition of a binding price floor have on consumer surplus in the market for fried bologna sandwiches?⍭ Generate me a similar question◊

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