Why does a price above the equilibrium price result in surplus?
A price floor set above the market equilibrium price has several side-effects. Consumers find they must now pay a higher price for the same product. As a result, they reduce their purchases or drop out of the market entirely. Meanwhile, suppliers find they are guaranteed a new, higher price than they were charging before. As a result, they increase production. Taken together, these effects mean there is now an excess supply (known as a surplus) of the product in the market.
