Below is the supply and demand graph for the market for strawberries, with the consumer surplus (CS) shaded in blue and the producer surplus (PS) shaded in red. Suppose that the federal government enacts a price floor in this market. Please shift the black "Price floor" line to the location where it would be a binding floor, and modify the consumer and producer surplus areas for how they would change due to this floor. Remember that if two movable points are in the same spot, you might need to move one of them temporarily out of the way in order to get to the other one. Supply Price PS CS Quantity Demand Price floor
Added by Robert J.
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The price floor is a minimum price set by the government, above the equilibrium price. In this case, we need to shift the black "Price floor" line to a location where it is above the equilibrium price. Show more…
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