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21 September, 22:16

Suppose the government has imposed a price floor on cellular phones. Which of the following events could transform the price floor from one that is binding to one that is not binding?

a. Cellular phones become less popular.

b. Traditional land line phones become more expensive.

c. The components used to produce cellular phones become less expensive.

d. Firms expect the price of cellular phones to fall in the future.

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  1. 21 September, 22:40
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    The best answer choice to the question: Which of the following events could transform the price floor from one that is binding to one that is not binding? would be, B: Traditional land line phones become more expensive.

    Explanation:

    Governments make economic decisions all the time, and generate policies on all matters pertaining to markets, in order to maintain a balance. Sometimes, due to specific circumstances, products can become less necessary, or less interesting, for buyers, be it because the prices are too high for the product, be it because there is little money to spend on certain items, or be it because other items on the market can replace the product on offer. To regulate this, governments thus bind products, and pricing, to encourage the consumption of one, or another product, and thus maintain an economic balance. In this case, cellular phones have become less interesting to consumers because using landline phones is cheaper and more effective, so they do not need cellphones. The government, to maintain the economy, places a floor on pricing, and the way to make this measure not binding, is by making traditional landline phones more expensive than cellphones, thus motivating people to buy more cellphones.
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