Refer to the accompanying graph to answer the next question. At the binding price floor, by how much would the quantity supplied change from the market equilibrium?

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BlackTom AI · Accepted Answer

The question asks what the change in quantity supplied is when the price floor binding is imposed, relative to the market equilibrium quantity.

First, identify the key points on the graph:
- Market equilibrium occurs at the intersection of the supply (S) and demand (D) curves, which is at a quantity of about 68,000 units.
- A binding price floor is set above the equilibrium price (P3), so producers supply more than consumers demand at that price. The quantity supplied at the price floor is read off the supply curve where the price floor intersects S; this looks to be about 100,000 units on the quantity axis.

Now compute the change in quantity supplied from the market equilibrium to the price-floor level:
- Quantity supplied at the price floor ≈ 100,000 units
- Market equilibrium quantity ≈ 68,000 units
- Change in quantity supplied = 100,000 − 68,000 = 32,000 units

Thus, the quantity supplied would increase by approximately 32,000 units when moving from the market equilibrium to the binding price floor.

MCD2020 - T1 - 2025 Lecture Quiz 4 - Government Price-Setting and Market Efficiency

Refer to the accompanying graph to answer the next question. At the binding price floor, by how much would the quantity supplied change from the market equilibrium?

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