Definition
Per Gans et al. (2021) a price floor is a legal minimum on the price at which a good can be sold. It is a restriction set in place by governments on prices. It must be binding to be effective (set above equilibrium price). This is the opposite to a price ceiling.
Binding Vs Non Binding
A price floor can be binding and not binding (Gans et al.):
A binding price floor is set above equilibrium price, causing a surplus.
A price floor that is not binding is set below equilibrium price, having no effect on the market.
Example
An example includes minimum wages: its purpose is to provide employees with an income that is enough to afford basic standard of living.
Another example per Segal (2025) is governments imposing floors on agricultural crops and products to mitigate the effects of price volatility (at a time of low prices) for the goods they produce, due to factors outside of their control.
AKA
Per Segal (2025), a price floor is also known as a price support.
Works cited:
Gans, Joshua, et al. Principles of Microeconomics. South Melbourne, Victoria, Australia, Cengage Learning Australia, 2021.
Segal, Troy. “Price Ceiling Types, Effects, and Implementation in Economics.” Investopedia, 2 Feb. 2025, www.investopedia.com/terms/p/price-ceiling.asp.
