With a price floor, the market will not clear.

Question

Quizplus · Accepted Answer

A price floor sets a minimum price that must be charged for a good or service, which can result in a surplus of the good or service because the quantity supplied exceeds the quantity demanded at that minimum price. Therefore, the market will not clear. When a price floor is implemented, it sets a legal minimum price for a good or service. If this minimum price is higher than the equilibrium price, it creates a surplus of supply and a shortage of demand, meaning the market will not clear. This leads to inefficiencies in the market and potentially negative consequences for producers and consumers.

With a Price Floor, the Market Will Not Clear