Suppose the government enacts a price floor on milk, which leads to a surplus in the market. How will the government then attempt to equalize supply and demand? Correct Answer (s) requiring suppliers to donate all surplus milk to developing countries The government has no option except to remove the price floor on milk. stimulating additional demand for milk restricting the supply of milk

Question

Business

Ignacio Mcgrath

17 February, 12:16

Suppose the government enacts a price floor on milk, which leads to a surplus in the market. How will the government then attempt to equalize supply and demand? Correct Answer (s) requiring suppliers to donate all surplus milk to developing countries The government has no option except to remove the price floor on milk. stimulating additional demand for milk restricting the supply of milk

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Declan · Answer 1

Stimulating additional demand for milk, restricting the supply of milk.

Explanation:

To equalize supply and demand the equilibrium price has to be raised to the price floor level. So that equilibrium price becomes equal to price floor and demand supply is equalized, surplus is removed. This can be done by either increasing demand for milk or by decreasing supply of milk. Either way the equilibrium price is raised in the market, by shifting the demand curve right or by shifting the supply curve left.