Minimum price legislation by government will?

A. reduce supply
B. increase supply
C. reduce demand and create surplus
D. increase demand and create scarcity

Correct Answer:

Option D – increase demand and create scarcity

Explanation

To prevent prices from falling further, the government may adopt “minimum price legislation” to protect the interests of farmers or producers or suppliers. The immediate effect of this price ceiling is the emergence of excess demand or persistent shortage of the commodity.