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

3284 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

How can a fall in interest rates affect the Aggregate Demand of an economy


Describe the effects of an indirect tax (ex. sales tax) on the market for cigarettes.


Why is a firm's average revenue equal to their marginal revenue in perfect competition?


Evaluate policies that could be implemented to reduce the market failures arising from polluting industries.


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