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    Effects of a price floor

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    This question states: h) Facing budget problems, Congress wants people who use national parks to pay more of their share for park maintenance. This is done by imposing a price floor. What would happen if the price floor is $4 above the equilibrium price?

    I'm including a graph so the answer can be graphed out, as well as, defined so I can understand how the answer was reached. I've created a sheet named "price floor" in the workbook attached with this problem.


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    Solution Preview

    Actually, no graphing is needed to solve this. We can see from the data that Qd=Qs only at one price, $3. So a price floor $4 above this would be ...

    Solution Summary

    Effect of price floor being avoid equilibrium price are examied.