What happens when a minimum price is imposed in a market?
ECONOMICS
WAEC 2019
What happens when a minimum price is imposed in a market?
- A. Shortage occurs
- B. Surplus occurs
- C. market maintains its equilibrium
- D. Many firms will close down
Correct Answer: B. Surplus occurs
Explanation
A minimum price is when the government doesn't allow prices to go below a certain level. At this point, suppliers will be willing to supply more in the market because they are certain to sell above a particular price. This will lead to a surplus in the market. The minimum price policy has been used in agriculture to increase farmers' income.
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