When supply and demand are both elastic, a price floor will cause a:
A) larger surplus than when supply and demand are inelastic.
B) smaller surplus than when supply and demand are inelastic.
C) larger shortage than when supply and demand are inelastic.
D) smaller shortage than when supply and demand are inelastic.

Question

Quizplus · Accepted Answer

When both supply and demand are elastic, a price floor will lead to a larger surplus because both consumers and producers are more responsive to price changes, leading to a greater quantity supplied and a smaller quantity demanded than when supply and demand are inelastic.

When Supply and Demand Are Both Elastic, a Price Floor