Final answer:
A government-imposed price floor results in a decrease in quantity demanded and an increase in quantity supplied, leading to surplus and a reduction in overall transactions in the market.
Step-by-step explanation:
When the government imposes a price floor in a market, it sets the minimum price that can be charged for a good or service, above the equilibrium price. Graphically, the imposed price floor leads to a surplus, because at the price floor level, the quantity supplied is greater than the quantity demanded. In economic terms, this results in a decrease in quantity demanded, because consumers are less willing or able to purchase goods at the higher price. Conversely, producers are willing to supply more, causing an increase in quantity supplied. However, because the price floor is above equilibrium, there are fewer transactions, as the demand constraint means the market adjusts to the lower quantity demanded. Therefore, the number of transactions falls, leading to a loss of social surplus, where consumer losses outweigh producer gains, resulting in a net negative effect on the market.