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

3035 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

What does the Price Elasticity of Demand measure? How is it calculated? And why is it important?


Despite a plunge in the value of Sterling during 2016, the UK managed to post the highest current account deficit on record. Why did the plunge in sterling not translate into a reduction in the CA deficit?


How can the central bank affect economic activity using monetary policy


Explain the effects of increased Tariffs on goods from the UK


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:

© 2025 by IXL Learning