What is the typical result of a price floor?

A price floor is a minimum price set by the government or an authority above the equilibrium price, meaning that the price is not allowed to fall below this level. When a price floor is established, sellers cannot sell the product at a lower price than the floor price.

As a result, if the price floor is set above the equilibrium price, it often leads to a surplus of goods. This occurs because at the higher price, the quantity supplied by producers increases, while the quantity demanded by consumers decreases. Essentially, more goods are available at the set price than what consumers are willing to purchase, leading to a situation where the supply exceeds the demand.

In contrast, other options do not accurately reflect the typical outcome of a price floor. A shortage of goods would occur if a price ceiling were set below the equilibrium price, while a decrease in production generally results from lower prices or reduced demand, not from a price floor. Similarly, market equilibrium represents a state where supply equals demand, which does not take place when a price floor disrupts the natural price-setting mechanism of the market.