Definition Of Floor Price In Economics

Definition of floor price.

Definition of floor price in economics.

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. Term price floor definition. Its aim is to increase companies interest in manufacturing the product and increase the overall supply in the market place. A price floor is the lowest legal price that can be paid in markets for goods and services labor or financial capital.

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. Dictionary term of the day articles subjects businessdictionary. Price floors and price ceilings are government imposed minimums and maximums on the price of certain goods or services. 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 is an established lower boundary on the price of a commodity in the market. Prices below the price floor do not result in an. A legally established minimum price. By observation it has been found that lower price floors are ineffective.

Pressured by special interest groups our beloved government is often convinced that the price of a good needs to be kept at a higher level. Examples of goods that have had price floors bestowed upon them include farm products and workers. The lowest preconceived price that a seller will accept. 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.