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How does a price floor create a surplus, and vice versa?
I'm studying for an econ. test tomorrow and I'm reviewing a chapter in the book about price floors and price ceilings, so I know that price floors create a surplus and price ceilings create a shortage, but I don't understand how. Please explain? Thanks(:
@anjaree thanks(: oh, and by "vice versa" I meant price ceilings creating shortages, not surpluses creating price floors...haha (:
1 Answer
- Anonymous9 years agoFavorite Answer
Because the price is too high.There is not enough demand for the supply which is still increasing.There is no vice versa.The surplus will not create a price floor.On the contrary, if the price too low,there is not enough supply when demand is still rising.