Price floor becomes non-binding with demand increase Steps:

• Year 1: Price floor P_f > initial D-S equilibrium price, binding; market price = P_f, traded quantity = demand at P_f = Q2 (surplus occurs).
• Demand shifts right to D2 in year 2, raising would-be equilibrium to P2 > P_f, Q3 > Q2.
• Price floor (minimum price) does not restrict when equilibrium price exceeds P_f, so non-binding.
• Market clears at new equilibrium: year 2 price = P2, quantity = Q3. Why D is correct:
• Increased demand raises equilibrium price above floor P_f, making control non-binding per price floor definition (binds only if eq < floor). Why the others are wrong:
• A: Year 2 price stays P_f with Q3, but floor non-binding allows price to rise to P2.
• B: Year 2 quantity stays Q2, but demand shift increases equilibrium quantity to Q3.
• C: Year 1 price P2 ignores binding floor forcing price to P_f. Final answer: D