Elasticity and Incentives

The graph shows the price of a good compared to the quantity supplied.
This graph demonstrates how

the amount produced greatly changes with the price.

Tasty Treat Tea is a popular iced tea drink. When the manufacturer begins to use imported tea leaves, the price rises and consumer demand for the drink falls. This suggests that

Tasty Treat Tea is an elastic good because it is more of a want than a need.

The government has set a price floor on bread. Manufacturers cannot sell loaves for less than $5.00, which is a dollar above the market price. What will most likely result from this price control?

The demand for bread will fall, which could result in an excess supply.

The graph shows the price of a good compared to the quantity demanded and the quantity supplied.
On this graph, the top horizontal line represents

X a price ceiling set above equilibrium. (wrong)

The graph shows the price of a good compared to the quantity demanded and the quantity supplied.
On this graph, the bottom horizontal line represents

X an effective price floor set below equilibrium. (wrong)

In the market, actions known as incentives affect

consumers or producers.

Which is an example of a product that is considered a need?

breakfast food

Goods that are considered to be needs tend to be

inelastic when the price changes.

The lowest amount a manufacturer can pay factory workers is an example of

a price floor.

What is the difference between a price floor and a price ceiling?

A price floor is the minimum price allowed for a good. A price ceiling is the maximum price allowed for a good.