Answer:
The correct answer is C. a non-binding price floor.
Explanation:
If a market is defined by the following demand and supply functions. The balance or price that reflects the coincidence in valuation of the good of consumers and producers, would occur at the intersection between both functions.
When the State intends to supplant the activity of the market in the allocation of goods and services, it can do so through a policy of maximum and minimum prices.
If it is considered appropriate that a certain price is less accessible than that which would take place in the market, it will establish a maximum price, above which no company can sell. When this occurs, we can graphically appreciate how at that price the quantity demanded is greater than that offered, thus generating an excess of demand that leads to the shortage of the good. In this context, some mechanism will be developed that allows the supply to be rationed (long lines, different criteria such as age, economic level, etc.) This being, land paid for the appearance of the “black market”.
