Question

minimum price regulation are inefficient because

Answer 1

The minimum price or price floor is the lowest possible price that can be charged for a particular good or service. A price floor is ptotect the sellers from the price is being too low, a binding price floor is set above the equilibrium price.

The minimum prices are ineffient because it disturbes the equilibrium in the market and a binding price floor creates a surplus in the market. The price floor increases the price paid by consumers so some of the consumer surplus is transferred into producer surplus and reduces the total surplus in the market. The loss in the total surplus is called the dead weight loss.