Question

A government that imposes a price floor above the equilibrium price of a good will cause:

Answer 1

When a price floor is set above the equilibrium price, quantity supplied will exceed quantity demanded, and excess supply or surpluses will result.

Price Floors are minimum prices set by the government for certain commodities and services that it believes are being sold in an unfair market with too low of a price and thus their producers deserve some assistance. Price floors are only an issue when they are set above the equilibrium price, since they have no effect if they are set below market clearing price.

When they are set above the market price, then there is a possibility that there will be an excess supply or a surplus. If this happens, producers who can't foresee trouble ahead will produce the larger quantity where the new price intersects their supply curve. Unbeknownst to them, consumers will not buy that many goods at the higher price and so those goods will go unsold

Here when the price increases from PE to PF, quantity supplied increased to QS from QE and quantity demanded decreases to QD from QE.