If a binding price floor is imposed on the video game market, then which of the following is most likely to occur?

• A. There will be no effect on the quantity supplied or demanded.
• B. A surplus of video games will result because the price floor is above the equilibrium price.
• C. A shortage of video games will result because the price floor is below the equilibrium price.
• D. The market will reach equilibrium at the price floor.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand what a price floor is — it is a legally imposed minimum price that sellers can charge for a good or service.
2. Step 2: Identify the equilibrium price where the quantity demanded equals the quantity supplied without any intervention.
3. Step 3: Recognize that a binding price floor is set above the equilibrium price, meaning the minimum price is higher than what the market would naturally set.
4. Step 4: Analyze the effects of the price floor being above equilibrium: at this higher price, suppliers want to supply more, but consumers want to buy less, leading to excess supply.
5. Step 5: Conclude that this excess supply is called a surplus, which means more video games are available than consumers want to buy at the imposed price floor.