What are the effects of a price floor?

Graph on paper.

When the Government sets a price floor (ie a price below which a good cant be sold) new suppliers will want to enter the market. However, if the price floor is above the equilibrium point (if it's below it doesnt have any effect), there wont be enough demand for the product, compared to how much it's being produced. So there will be a surplus of good produced equal to the space Q.

NB
Answered by Nicola B. Economics tutor

2781 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

When answering my essay question, what could be the key evaluative points when talking about fiscal policy?


What could cause a rise in the demand for University places?


What is Quantitative Easing and evaluate how it impacts an economy?


What is Price Elasticity of Demand?


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2025

Terms & Conditions|Privacy Policy
Cookie Preferences