Basics
The term for the minimum price set above the equilibrium by the government.
What is price floor?
A practice where producers sell goods illegally below the price floor.
What is black market activity?
This group benefits if the government purchases surplus goods at the price floor.
Who are producers?
The measure of how much quantity demanded changes in response to price changes.
What is price elasticity of demand?
A solution governments use to prevent surpluses from going to waste.
What is sending surplus as aid?
The two primary markets where price floors are most commonly applied.
What are agricultural markets and labor markets?
The term for resources being misallocated due to overproduction caused by price floors.
What is allocative ineffeciency?
This group experiences higher costs and lower consumption as a result of price floors.
Who are consumers?
The effect on producer revenue if demand is inelastic and a price floor is imposed.
What is an increase in revenue?
The reason selling surpluses abroad can create diplomatic challenges.
What is unfair trade practices or accusations of dumping?
The price level at which producers would supply exactly what consumers demand.
What is the equilibrium price?
The action governments often take to address surpluses caused by price floors.
What is purchasing the surplus?
The group that might see increased employment due to greater production from price floors.
Who are workers?
The effect on revenue if demand is elastic and the price floor significantly reduces quantity sold.
What is a decrease in revenue?
The cost associated with storing unsold surpluses of agricultural goods.
What are storage costs?
The economic term for the difference between Q1 and Q2 caused by a price floor.
What is excess supply or a surplus?
A long-term issue caused by guaranteeing high prices, leading firms to become less competitive
What is production ineffeciency?
The cost incurred by the government when purchasing surpluses.
What is opportunity cost?
The term for the situation where the effect of higher prices is stronger than the reduction in demand.
What is revenue gain?
A strategy where governments pay producers not to overproduce.
What is resource reallocation or production limits
The reason why minimum prices are set above equilibrium, despite the term "minimum."
What is to ensure higher prices for producers?
The combined term for lost consumer and producer surplus due to welfare losses.
What is deadweight loss?
The impact on producers’ total revenue if the price floor increases price but reduces demand.
What depends on the elasticity of demand?
The determinant of whether a price floor will succeed in raising producers’ total revenue.
What is the relative elasticity of demand?
A disadvantage of government intervention in disposing of surpluses through exports or destruction.
What is ethical or social backlash?