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

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BlackTom AI · Accepted Answer

To approach this question, first identify what a binding price floor does: it sets a minimum price above the market-clearing level, leading to a higher price for buyers and a lower quantity demanded along the demand curve.
Option a: 'The quantity demanded would decrease by 18,000 units.' This figure would only be correct if the price floor intersected the demand curve at a quantity 18,000 units lower than the equilibrium, but the graph shows a larger drop from the equilibrium quantity, so this specific change underestimates the decrease.
Option b: 'The quantity demanded would increase by 32,000 units.' A binding price floor raises price, not lowers it, and would not cause an increase in quantity demanded according to the law of demand; so an increase here contradicts basic demand behavior.
Option c: 'The quantity demanded would decrease by 30,500 units.' On the graph, the market equilibrium quantity sits at about 68,000 units. The binding price floor corresponds to a higher price level (P3) that reduces consumption to roughly 37,500 units on the demand curve. The difference 68,000 − 37,500 equals 30,500 units, matching the vertical gap shown between equilibrium quantity and the lower quantity demanded at the floor price.
Option d: 'The quantity demanded would decrease by 32,000 units.' Although this option correctly notes a decrease, the exact amount depicted by the graph’s vertical distance from the equilibrium quantity to the floor-price demand point is 30,500 units, not 32,000; thus this figure misstates the magnitude of the change.
In summary, the reasoning uses the concept that a binding price floor raises the price and moves the quantity demanded down along the demand curve from the equilibrium quantity to the quantity corresponding to the floor price; the precise amount of this movement, as read from the graph, is 30,500 units, which is why the other options misstate both direction or magnitude.

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

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