Minimum Price Control (Price Floor):

A minimum price or price floor is a legal price set above the equilibrium market price. One can buy at or above the minimum price but cannot buy at a price below it. It is set to protect incomes of producers when the equilibrium market price for a product is found to be unfairly low. Minimum prices are normally set for agricultural products to protect the incomes of farmers and labour (the minimum wage). When a minimum price is set for a good it reduces quantity demanded while quantity supplied increase thereby resulting in persistent excess supply or surplus of the good.

From Figure the equilibrium market price is OPe which may be unfairly low necessitating the setting of a price floor of OPmn by government because the price floor is higher than the equilibrium price, quantity supplied will increase from OQe to OQs while quantity demanded will decrease from OQe to OQd. This will create surplus of QdQs or AB of the good. Therefore whenever a price ceiling is set it creates persistent surplus of the good.