Deadweight loss can occur even when a price floor is set above the equilibrium price, as it prevents mutually beneficial trades from occurring.

Deadweight loss happens when a price floor is set above the equilibrium price, which is the price where supply and demand balance. When the government sets a minimum price that is higher than what consumers are willing to pay, some buyers will choose not to buy the product, while some sellers may want to sell more than consumers will buy. This creates a situation where not all potential trades occur, meaning that both consumers and producers miss out on a chance to benefit from buying and selling at a lower price. For example, if a price floor is set for milk at $3 per gallon, but the equilibrium price is $2, some people may not buy milk at the higher price, leading to unsold milk and wasted resources. This loss in potential transactions is what we call deadweight loss, as it represents the lost economic value from trades that could have happened.