In a standard supply and demand framework, what is the main market effect of a binding price floor that is set above the equilibrium price?

Introduction / Context:
Price controls such as price floors and price ceilings are important topics in microeconomics and public policy. A price floor is a legally imposed minimum price that sellers are allowed to charge. When a floor is set above the market equilibrium price, it is called binding because it actually affects market outcomes. Understanding that a binding price floor leads to a surplus of goods is crucial for interpreting policies like minimum wages and agricultural support prices.

Given Data / Assumptions:

• The question refers to a binding price floor, meaning it is set above the equilibrium price.
• We use a standard competitive market with downward sloping demand and upward sloping supply.
• Buyers and sellers must obey the legal minimum price.
• We assume no black markets or side payments that bypass the control.

Concept / Approach:
In an unregulated market, the equilibrium price is where quantity demanded equals quantity supplied. If the government sets a price floor above this level, sellers must charge at least that higher price. At the higher price, consumers demand fewer units, while producers are willing to supply more units because the price is attractive. This combination of reduced demand and increased supply leads to a surplus, meaning quantity supplied exceeds quantity demanded. Therefore the correct description of the outcome is surplus supply of goods.

Step-by-Step Solution:
Step 1: Draw or imagine a standard demand and supply diagram with price on the vertical axis and quantity on the horizontal axis.Step 2: Identify the equilibrium point where the demand and supply curves intersect, giving the equilibrium price and quantity.Step 3: Introduce a price floor above the equilibrium price. At this higher price, read off the quantity demanded from the demand curve; it will be lower than the equilibrium quantity.Step 4: At the same higher price, read off the quantity supplied from the supply curve; it will be higher than the equilibrium quantity.Step 5: Since quantity supplied is greater than quantity demanded, the result is a surplus or excess supply of goods in the market.Step 6: Therefore, the correct option is "Surplus supply of goods".

Verification / Alternative check:
Consider a simple example of a minimum support price for a crop that is above the market clearing level. Farmers see the higher guaranteed price and produce more, but consumers are unwilling to buy as much at that price. The government often has to purchase the surplus to sustain the policy. This real world pattern illustrates that binding price floors create surplus supply, matching the theoretical prediction and confirming the answer.

Why Other Options Are Wrong:
Option a, "Excess demand for the goods", describes a shortage, which occurs when a binding price ceiling is set below equilibrium, not a floor above it. Option c, "Less supply of goods", is misleading; although less quantity is actually sold, producers are willing to supply more units at the higher price, so in terms of supply schedule there is more, not less, supply. Option d, "No demand for the goods", is extreme and unrealistic; even at higher prices some consumers remain willing to buy. None of these accurately capture the surplus creation caused by a binding price floor.

Common Pitfalls:
Students sometimes mix up the effects of price ceilings and price floors. A useful memory aid is "ceilings cause shortages, floors cause surpluses" when they are binding. Another pitfall is to think only about what happens to the amount actually traded and forget that supply and demand refer to willingness, not just actual transactions. The unsold surplus is a key part of the analysis. Repeatedly sketching the diagram and checking which side of equilibrium the control lies on helps avoid these common mistakes.

Final Answer:
A binding price floor set above equilibrium causes a surplus supply of goods, because quantity supplied exceeds quantity demanded at the enforced price.