Principles of Macroeconomics / Unit 2 MAC 0121 short lesson, about 20 seconds
Price Floors
Captions available
The idea
A price floor is a legal minimum price. Set above equilibrium it is binding and creates a lasting surplus, because the law stops the price from falling to clear the market.
In practice
At the floor, sellers offer more than buyers will take, and the excess stays unsold.
Where people slip
Set below equilibrium a floor does nothing, because the market price is already above it.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
Something wrong in this lesson? Flag it · Sources for Principles of Macroeconomics