Why might producers argue for a price floor if it ends up making society worse off? exhibit 7Agricultural Price FloorsThe demand for and supply of an agri-cultural foodstuff are shown in thisexhibit The equilibrium price is P con-Samers surplus (CS) is areas 1+2+ 3:producers surplus is areas 4loor of P effectively transfers someof the comumers surplus to produc-ws in the form of a gain in producerssarplus Specifically. at P.coresamerssurplus is area 1 and producers' surplusis areas 2+ 4. Consarmers are net losers because consumers surplus hasdecreased by areas 2+3. Producers arenet gainers because producers surplushas increased from areas 4 +5 to areas2+4 and area 2 is targer than area S.Overall, the economic pie ofCS+ PS hasdecreased from areas 1+2 +3+4 +Sto areas 1+2+4.S. A pricePrD]QuantitySELF-TEST

Price floor is the least legal price of a good or service. Example of price floor minimum wage rate

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Why might producers argue for a price floor if it ends up making society worse off

Principles of Microeconomics (MindTap Course List)

8th Edition

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter7: Consumers, Producers, And The Efficiency Of Markets

Section: Chapter Questions

Problem 9PA

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