Price Floor Economics

An effective price floor.

Price floor economics.

Price floor has been found to be of great importance in the labour wage market. The most common price floor is the minimum wage the minimum price that can be payed for labor. Price floors are also used often in agriculture to try to protect farmers. Price floor price floor is a situation when the price charged is more than or less than the equilibrium price determined by market forces of demand and supply.

But this is a control or limit on how low a price can be charged for any commodity. A price floor is a government or group imposed price control or limit on how low a price can be charged for a product good commodity or service. To figure this out first we must discuss a price floor which in economics is a minimum price imposed by a government or agency for a particular product or service. A price floor is an established lower boundary on the price of a commodity in the market.

Governments usually set up a price floor in order to ensure that the market price of a commodity does not fall below a level that would threaten the financial existence of producers of the commodity. A price floor is the lowest legal price a commodity can be sold at. Types of price floors 1. A price floor or a minimum price is a regulatory tool used by the government.

A price floor is the lowest legal price that can be paid in markets for goods and services labor or financial capital. Real life example of a price ceiling in the 1970s the u s. Perhaps the best known example of a price floor is the minimum wage which is based on the normative view that someone working full time ought to be able to afford a basic standard of living. A price floor must be higher than the equilibrium price in order to be effective.

More specifically it is defined as an intervention to raise market prices if the government feels the price is too low. Like price ceiling price floor is also a measure of price control imposed by the government. It is legal minimum price set by the government on particular goods and services in order to prevent producers from being paid very less price. Price floors are used by the government to prevent prices from being too low.

In this case since the new price is higher the producers benefit.