What impact does a price floor typically have on a market?

A price floor is a minimum price set by the government or an authority, above the equilibrium price, for a particular good or service. When the price is set above the market equilibrium, it creates an environment where the quantity supplied exceeds the quantity demanded. Producers are encouraged to supply more of the good at the higher price, but consumers may purchase less due to the increased cost. This discrepancy leads to a surplus in the market, as more of the good is available than consumers are willing to buy at that price.

Additionally, while it may affect quality, incentivize producers in different ways, or seem to have no impact in certain circumstances, those dynamics are secondary to the foundational economic principle that a price floor creates an imbalance in supply and demand, resulting in surplus. Thus, the correct understanding of the impact of a price floor is that it leads to surplus in the market.