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

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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

exhibit 7
Agricultural Price Floors
The demand for and supply of an agri-
cultural foodstuff are shown in this
exhibit The equilibrium price is P con-
Samers surplus (CS) is areas 1+2+ 3:
producers surplus is areas 4
loor of P effectively transfers some
of the comumers surplus to produc-
ws in the form of a gain in producers
sarplus Specifically. at P.coresamers
surplus is area 1 and producers' surplus
is areas 2+ 4. Consarmers are net los
ers because consumers surplus has
decreased by areas 2+3. Producers are
net gainers because producers surplus
has increased from areas 4 +5 to areas
2+4 and area 2 is targer than area S.
Overall, the economic pie ofCS+ PS has
decreased from areas 1+2 +3+4 +S
to areas 1+2+4.
S. A price
Pr
D]
Quantity
SELF-TEST

Definition Video Definition Lowest legal price that can be paid in a market for goods and services, labor, or financial capital. A price floor protects a price from falling below a stipulated level. Video

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