Just as the fixing of a maximum price, the fixing of a minimum price has an
impact on the welfare of the groups involved (see above figure).
The price increase affects consumers. They suffer a loss in the amount of the
orange and purple area. The original consumer surplus is reduced to the pale
green triangle.
The producers, on the other hand, make both a loss (pink area) because
of the reduction of quantity and a profit (purple area) from the price
increase.
As the minimum price rises, sales decrease and the pink area grows. At the same
time, the purple area only grows until the decrease in quantity outweighs the
increase in price. Above a certain limit, producers also suffer a net welfare loss
through a minimum price.
The overall welfare is reduced in any case.