Suppose the state of Mississippi sets a price floor in the market for cotton.If the floor is set below the market-clearing price of cotton,the floor will cause a surplus of cotton.

Price Floor

A government-imposed minimum price for goods or services, intended to prevent prices from falling below a certain level.

Market-clearing Price

The price at which the quantity demanded by buyers equals the quantity supplied by sellers, eliminating any surplus or shortage in the market.

Surplus

The condition in which the quantity of a good or service supplied exceeds the quantity demanded at the current price.