Question

If the government takes no action to enforce price floor, how will free market likely solve the disequilibrium of the market?

Answer 1

Since the price floor is the legal minimum price which can be charged and it is set above the equilibrium price. It leads surplus of outputs.

So when the price floor is set above the equilibrium price, only then it is effective but when it is set either below the equilibrium price or at the equilibrium price, then it will be ineffective. So there will be no unintended inventory and market gets cleared.

Since price floor is set above the equilibrium price, so there will be surplus of quantity. If the government takes no action to enforce price floor, then due to excess supply at the price floor, sellers will reduce price for selling more and consumer demand more at lower price. Hence this invisible force will continue until quantity demand and quantity supply becomes equal and equilibrium is reached. Hence in this way disequilibrium is resolved.