Minimum Price Discourages Demerit Good Consumption

Steps:

• An effective minimum price sets the floor above equilibrium, creating surplus.
• This raises the market price, reducing quantity demanded.
• Higher prices limit consumer access, targeting harmful products.
• Without other interventions, the goal focuses on curbing overuse.

Why A is correct:

• Demerit goods (e.g., tobacco) have negative externalities; minimum price law raises cost to decrease consumption and mitigate harm.

Why the others are wrong:

• B: Merit goods (e.g., healthcare) need subsidies to boost consumption, not price floors that deter it.
• C: Minimum price increases, rather than reduces, the market price.
• D: While it raises producer revenue, the policy's core aim for effective minimums is consumption control, not income support.

Final answer: A