Price Floor Price Quantity S D Look at the Market Equilibrium Price and the Market Equilibrium Quantity QEQE PEPE

Price Floor A Price Floor is a Minimum Price set by the government. When a Price Floor is legislated, a good can not be sold for a price lower than the legislated price. For example, if the government sets the price at $4.00, this is the Lowest price the good can be sold.

Price Floor Price Quantity S D A Price Floor has been set by the government. A good cannot be sold for a lower price. Where is the Price Floor in relationship to the Market Equilibrium Price? PEPE QEQE

Price Floor Price Quantity S D The quantity demanded is less than the quantity supplied. A surplus of the good exists. There is excess supply. QDQD QSQS Price Floor PEPE

Price Quantity S D In order for the Price Floor to be effective, the maximum price must be set above the market equilibrium price. Can you explain why? QDQD QSQS Price Floor PEPE