Define price floor. Explain the impications of price floor
OR
Market of a good is in equilibrium. Demand for the good 'decreases'. Explain the chain of effects of this change

Explanation

Price Floor' is the minimum price fixed by the government below which sellers cannot sell their product. Since this price is normally set above the equilibrium price, there is excess supply in the market. As the seller may not be able to sell all that he wants to sell, he may illegally attempt to sell the product at a price below the floor price.
OR
Market of a good is in equilibrium. If the demand for the good decreases, this creates an excess supply of the good at the existing price in the market.
`**` The excess supply creates competition among sellers, resulting in fall in price, because sellers will not be able to sell all that they want to sell at the existing price.
`**` Fall in price leads to rise in demand and fall in supply.
`**` These changes continue till the market reached new equilibrium.