DP Economics Questionbank

Explain the impact of a price floor on market outcomes.

Evaluate the effectiveness of price floors in achieving a reduction in the consumption of demerit goods.

Discuss the view that price floors are more effective than subsidies in providing assistance to producers in the agricultural sector.

Explain why governments impose price floors in the market for agricultural products.

Using an appropriate externalities diagram, explain why a government might decide to impose a price floor on a demerit good.

Using a demand and supply diagram, explain why the increase in the minimum wage might affect Cambodia’s garment manufacturing competitiveness against other countries in the region (paragraph [4]).

State one measure that the government of Nissos might take to deal with this corn surplus, following the imposition of the price floor.

Explain one possible advantage and one possible disadvantage of governments setting a price floor in agricultural markets.

Draw and label on Figure 1 a curve that illustrates the price floor in Nissos that leads to a monthly surplus of 3 million kg of corn.

Using Figure 1, determine the size of the decrease in monthly corn consumption following the imposition of the price floor.

Using Figure 1, calculate the change in consumer expenditure on corn in Nissos.