Price floor is defined as the act of fixing the minimum price in the market below which the goods cannot be exchanged legally in the market. The act of price floor is taken up to save the interest of the producers.

For example- The harvest season witnesses the overwhelming production of wheat in a particular year. The market forces of demand and supply in the free market mechanism fixes the price at $20 per bushel. The price has gone down by 25% since the last harvest season and farmers are unable to cover their cost. In such a scenario the government would interfere and fix the price at $27 per bushel. This price is known as the price floor fixed by the government to safeguard the interest of the farmers.