A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product, good, commodity, or service. It is one type of price support; other types include supply regulation and guarantee government purchase price. A price floor must be higher than the equilibrium price in order to be effective. The equilibrium price, commonly called the "market price", is the price where economic forces such as supply and demand are balanced and in the absence of external influences the (equilibrium) values of economic variables will not change, often described as the point at which quantity demanded and quantity supplied are equal (in a perfectly competitive market). Governments use price floors to keep certain prices from going too low.

Two common price floors are minimum wage laws and supply management in Canadian agriculture. Other price floors include regulated US airfares prior to 1978 and minimum price per-drink laws for alcohol. While price floors are often imposed by governments, there are also price floors which are implemented by non-governmental organizations such as companies, such as the practice of resale price maintenance. With resale price maintenance, a manufacturer and its distributors agree that the distributors will sell the manufacturer's product at certain prices (resale price maintenance), at or above a price floor (minimum resale price maintenance) or at or below a price ceiling (maximum resale price maintenance). A related government- or group-imposed intervention, which is also a price control, is the price ceiling; it sets the maximum price that can legally be charged for a good or service, with a common government-imposed example being rent control.

A price floor could be set below the free-market equilibrium price. In the first graph at right, the dashed green line represents a price floor set below the free-market price. In this case, the floor has no practical effect. The government has mandated a minimum price, but the market already bears and is using a higher price.

By contrast, in the second graph, the dashed green line represents a price floor set above the free-market price. In this case, the price floor has a measurable impact on the market. It ensures prices stay high, causing a surplus in the market.

In practice, many goods and services are not perfectly identical, real markets experience friction and hysteresis, different participants have different amounts of market power. As a result, prices vary from transaction to transaction. Price floors can thus affect the price of certain transactions but not others, even if they are below the average price. The market price can also vary over time, and a price floor can affect the market price during low periods.

A price floor set above the market equilibrium price has several side-effects. Consumers find they must now pay a higher price for the same product. As a result, they reduce their purchases, switch to substitutes (e.g., from butter to margarine) or drop out of the market entirely. Meanwhile, suppliers find they are guaranteed a new, higher price than they were charging before, but with fewer willing buyers.

Taken together, these effects mean there is now an excess supply (known as a "surplus") of the product in the market to maintain the price floor over the long term. The equilibrium price is determined when the quantity demanded is equal to the quantity supplied. Further, the effect of mandating a higher price transfers some of the consumer surplus to producer surplus, while creating a deadweight loss as the price moves upward from the equilibrium price. A price floor may lead to market failure if the market is not able to allocate scarce resources in an efficient manner.

An example of a price floor is minimum wage laws, where the government sets out the minimum hourly rate that can be paid for labour. In this case, the wage is the price of labour, and employees are the suppliers of labor and the company is the consumer of employees' labour. When the minimum wage is set above the equilibrium market price for unskilled or low-skilled labour, employers hire fewer workers. Employers may cut their use of labour by switching to a "self-serve" model in which customers do an action previously done by staff (e.g., self-serve gas stations); or buying machines, computers or robots to do part or all of employees' jobs (e.g., automated teller machines in banks, automated ticket kiosks in parking garages).