Option 1 -> Excess demand occurs when price is set below equilibrium (price ceiling), not with price floors.
Option 2 -> When a price floor is set above equilibrium price, quantity supplied exceeds quantity demanded, creating excess supply.
Option 3 -> Shortages occur with price ceilings (maximum prices), not price floors which create surpluses.
Option 4 -> Price floors prevent market equilibrium by artificially keeping prices above the natural equilibrium level.
Hence, Option 2: Excess supply -> A price floor is a minimum price set above the market equilibrium. At this artificially high price, producers want to supply more goods (higher quantity supplied) while consumers want to buy less (lower quantity demanded). This mismatch creates a surplus or excess supply in the market. Classic examples include minimum wage laws and agricultural price supports, both of which can lead to unemployment (excess labor supply) and crop surpluses respectively. -> correct