I am struggling to understand this concept in a study guide... Suppose the price

Question

I am struggling to understand this concept in a study guide... Suppose the price of corn is above equilibrium price. "Greed" (individuals pursuing their own interests) will push prices... higher lower they won't change I think they would go lower in an attempt to reach equilibrium. But I don't understand why prices are above equilibrium in the first place without a price floor which would create a surplus? If there is a price floor then they couldn't go lower, right? Do you know what would happen and why?

Explanation / Answer

price floor is always higher the equilibrium price.

For a price floor to be effective, it must be set above the equilibrium price. If it's not above equilibrium, then the market won't sell below equilibrium and the price floor will be irrelevant.

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