A price floor is the minimum price legally allowed for a good or service.
For a price floor to affect a market, it generally must be set above the equilibrium price—the price at which quantity supplied equals quantity demanded. At that binding level, sellers want to supply more than buyers want to purchase, creating a potential surplus.
Minimum-wage laws are a familiar example because they establish a floor under hourly pay. Agricultural support programs have also used price floors, sometimes with governments buying excess output or restricting production to prevent large surpluses.
A price floor differs from a price ceiling, which sets a legal maximum. A floor does not always change market outcomes: if it is below the equilibrium price, normal market transactions already occur above it. The actual effects depend on enforcement, demand and supply conditions, and whether authorities address unsold production or unemployment.