Suppose the price floor is set below the equilibrium price. This will lead to the quantity supplied exceeding the quantity demanded.

Question

Quizplus · Accepted Answer

If the price floor is set below the equilibrium price, it will have no effect on the market because it is not binding. In other words, the market will still clear at the equilibrium price and quantity since the price floor is lower than what the market would naturally produce. Therefore, there will be no excess supply or demand.

Suppose the Price Floor Is Set Below the Equilibrium Price