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?

Question

BlackTom AI · Accepted Answer

Start by restating what the graph conveys and what the question asks. The scenario involves a binding price floor, meaning the floor price is set above the market-clearing (equilibrium) price, which causes the quantity supplied to rise relative to the equilibrium quantity. On the graph, the market equilibrium occurs at the intersection of the demand (D) and supply (S) curves, which corresponds to a quantity of 68,000 units.

Next, determine the quantity supplied at the binding price floor. A binding price floor forces producers to supply at the higher floor price (the horizontal line at the floor price). From the graph, following the vertical line up from the price floor level to the supply curve, the quantity supplied is 100,000 units.

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

Why the other interpretations would be incorrect (general guidance since options aren’t shown here):
- If you compared the floor quantity to a different base quantity (e.g., 50,000 or 80,000), you’d get a different delta that wouldn’t align with the graph’s indicated points.
- If the price floor were non-binding (below or at the equilibrium price), the quantity supplied would equal the equilibrium quantity, resulting in a change of zero, which is not the case here.
- Misreading the axis labels (confusing the 68,000 mark with 100,000) would lead to an incorrect delta; the correct reading follows the verticals from the price floor to the supply curve.

Overall, the 32,000-unit increase in quantity supplied reflects the effect of moving from the market-clearing quantity to the higher quantity producers are willing to supply at the binding floor price.

MCD2020 - T1 - 2025 Homework Quiz 4 - Reopened

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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