A
regulation, either by the government or by other governing bodies, that prohibits the payment of less than a set price for a good or service. A good example of this would be
minimum wage.
In terms of
microeconomics, the set price floor has to be set above the
equilibrium price or it would do nothing. As a result of placing a fixed price above the
equilibrium price, there is less of a demand and more willingness for
supply. As a result, this creates a
surplus.
While it does have its perks, it is considered as one obstacle to production
efficiency. By creating a surplus and working outside the
equilibrium point, it creates a
deadweight loss, and becomes a social loss.