Economics Supply And Demand Questions
Price floors have the impact of setting a minimum price for a particular good or service in the market. This means that the price cannot fall below the floor level. The main impact of price floors is that they create a surplus in the market, as the quantity supplied exceeds the quantity demanded at the higher price. This surplus can lead to inefficiencies, as producers may struggle to sell their excess supply and may have to incur additional costs for storage or disposal. Additionally, price floors can also lead to a decrease in consumer welfare, as the higher prices may make the good or service less affordable for some consumers.