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.

Answered by Nicola B. Economics tutor

1994 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

What would be the impact on the multipler effect given an increase in income tax?


Explain the possible causes of deflation in an economy. (15)


What is the law of diminishing returns?


Why does lowering interest rates boost aggregate demand?


We're here to help

contact us iconContact usWhatsapp logoMessage us on Whatsapptelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

© MyTutorWeb Ltd 2013–2024

Terms & Conditions|Privacy Policy