Question

Does a price floor attempt to make a price higher

or lower?

Short answer

A price floor is an attempt to raise a cost.

Step-by-step solution

Concept of price floor.

Price floor is a pricing policy in which the government establishes a minimum price below which no buyer can purchase the product and no seller can sell it in the market.

Explanation of price floor with diagram.

A price floor that is set higher than the equilibrium price level attempts to raise the price level. The equilibrium price and quantity are denoted by the letters $P$and $Q$in the graphic below.

If the price floor is set higher than the equilibrium price level, it becomes legally enforceable. There would be excess supply or surplus of goods and services at the minimal price level, which is higher than the equilibrium price level because there would be more supply than demand for goods and services. Because these are the government's minimum pricing, they cannot be reduced. The cost can only go up, rewarding sellers instead of customers. The market can't be in balance because demand and supply aren't equal.