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

3399 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Explain price elasticity of demand


Discuss the effects of an introduction of a minimum wage on the labour market.


Why have Central Banks introduced Quantitative Easing? What other policies have been introduced in the 21st Century?


Explain how petrol and diesel cars may be a source of market failure?


We're here to help

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

MyTutor is part of the IXL family of brands:

© 2026 by IXL Learning