What is a Price Floor? (Easiest Explanation)

A price floor is a minimum price set by the government or an authority to prevent prices from falling below a certain level. This policy is typically implemented to protect producers by ensuring that they receive a fair income for their goods or services. Common examples include minimum wage laws in labor markets and agricultural price supports. While price floors can help stabilize income for producers, they may also lead to surplus supply if the set price is above the equilibrium market price, resulting in excess goods that may go unsold.