What is one effect of a price floor set above the equilibrium price?

A price floor is a legal minimum price that must be paid for a good or service, and when it is set above the equilibrium price, it has specific effects on the market. In this scenario, a price floor that exceeds the equilibrium price means that the minimum price is higher than the price at which the quantity supplied equals the quantity demanded.

When the price floor is above the equilibrium price, suppliers are willing to produce more of the good because they can sell it for a higher price. However, consumers are not as willing to purchase the good at this higher price, which leads to a situation where the quantity supplied exceeds the quantity demanded. This imbalance creates a surplus of the good in the market, as there are more units available than consumers are willing to buy at that price.

Therefore, the effect of a price floor set above equilibrium price is that it creates a surplus, reflecting the discrepancy between supply and demand at the mandated price level. This situation can lead to inefficiencies in the market as resources are not allocated optimally, consumers face higher prices, and producers may struggle to sell their excess inventory.