In a competitive market, a price floor will result in persistent shortages of a product.
A shortage is when the quantity demanded by consumers exceeds the quantity supplied by producers.
This idea is called “elasticity,”.
Which means that there are more people who want to buy something than there are sellers willing to sell it.
When this happens, prices for the product go up and customers have less access to it because supply falls short of demand.
A price floor is when the government sets a minimum on how much someone can charge for something.
This creates an artificial scarcity of that product.
Which means that it takes some time to get more supply from producers.
Because they are not willing to sell at less than what was determined as the “fair” price by policymakers.
The law prohibiting prices below $0.01 doesn’t allow farmers in California and other states with similar laws to lower their prices.
If there’s been a drought or damage done during harvest season.
This leads to shortages of organic produce across America!
The shortage problem could be solved by either lowering barriers so that foreign-grown fruit would come into American markets (and vice versa).
Or changing our agricultural policies altogether.