Price Floor to Curb Demand

Steps:

• Goal is to reduce alcohol consumption, which falls as price rises (law of demand).
• Fixing price means using controls like floors (minimums) or ceilings (maximums).
• To raise effective price above market equilibrium, set a binding minimum price.
• This limits quantity sold to what consumers demand at the higher price, cutting consumption.

Why C is correct:

• A minimum price above market price creates a binding price floor, raising the price and reducing quantity demanded via the law of demand.

Why the others are wrong:

• A: Maximum price above market is non-binding, so market price and consumption unchanged.
• B: Minimum price below market is non-binding, so market price and consumption unchanged.
• D: Maximum price below market is a binding price ceiling, lowering price and increasing consumption.

Final answer: C