<P> A price floor is a government - or group - imposed price control or limit on how low a price can be charged for a product . A price floor must be higher than the equilibrium price in order to be effective . </P> <P> A price floor can be set below the free - market equilibrium price . In the first graph at right, the dashed green line represents a price floor set below the free - market price . In this case, the floor has no practical effect . The government has mandated a minimum price, but the market already bears a higher price . </P>

When the minimum wage is set below the market equilibrium wage it does not affect the market