Understanding Price Floor and Deadweight Loss

This lesson explores how a Price Floor affects a market and how a binding price floor can create a surplus and Deadweight Loss. The graph shows a linear demand and supply curve, with Price on the vertical axis and Quantity on the horizontal axis.

The graph shows the competitive equilibrium, the controlled price under the price floor, and the resulting surplus. It also highlights the Deadweight Loss created when some mutually beneficial trades no longer take place.

How to Use the Playground

• Use the slider or +/− buttons (on mobile) to change the Price Floor.
• Watch how the Quantity Demanded, Quantity Supplied, and Surplus change as the price floor changes.
• Observe how the Deadweight Loss changes when the price floor becomes binding.
• Compare the controlled market with the competitive equilibrium to see how a price floor affects the quantity traded and total surplus.
• Use the displayed values to understand how the price floor can prevent some mutually beneficial trades from taking place.