Price Floor

A price floor is a minimum price set by the government or a regulating authority for a particular good or service. It prevents prices from falling below this level, often to protect producers or ensure fair income. For example, if the government sets a minimum wage, it acts as a price floor for labor. While intended to support suppliers, price floors can lead to surpluses if the minimum price is higher than what consumers are willing to pay, potentially resulting in excess supply or unsold goods.