Define A Price Floor

Floors in wages.

Define a price floor.

Limit beyond which a cost will not be allowed to fall. The government used price supports to maintain the price floor floor base a. Price ceiling is a situation when the price charged is more than or less than the equilibrium price determined by market forces of demand and supply. Price floor floor below which prices are not allowed to fall.

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. Price floor is a price control typically set by the government that limits the minimum price a company is allows to charge for a product or service its aim is to increase companies interest in manufacturing the product and increase the overall supply in the market place. Real life example of a price ceiling. 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.

The equilibrium price commonly called the market price is the price where economic forces such as supply and demand are balanced and in the absence of external. This control may be higher or lower than the equilibrium price that the market determines for demand and supply. By observation it has been found that lower price floors are ineffective. It has been found that higher price ceilings are ineffective.

A price floor must be higher than the equilibrium price in order to be effective. Price floor has been found to be of great importance in the labour wage market. Price ceiling has been found to be of great importance in the house rent market.