A Level Economics (9708)•9708/12/O/N/21
Explanation
Increasing a price floor reduces quantity sold
Steps:
- A minimum price acts as a price floor, binding when above equilibrium.
- At P1, quantity sold equals quantity demanded, Q1.
- Raising the floor to P2 > P1 shifts along the downward-sloping demand curve.
- Quantity demanded falls to Q2 < Q1, so sales decrease.
Why A is correct:
- Law of demand: Higher price reduces quantity demanded, limiting sales to Q2 under the price floor.
Why the others are wrong:
- B: Contradicts law of demand; higher price decreases, not increases, quantity sold.
- C: Reverses quantities; sales fall from larger Q1 to smaller Q2.
- D: Reverses direction and effect; sales decrease, not increase.
Final answer: A
Topic: Methods and effects of government intervention in markets
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