Definition Of Price Floor In Economics

A price floor or a minimum price is a regulatory tool used by the government.

Definition of price floor in economics.

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. More specifically it is defined as an intervention to raise market prices if the government feels the price is too low. In this case since the new price is higher the producers benefit. A price ceiling is essentially a type of price control price ceilings can be advantageous in allowing essentials to be affordable at least temporarily.

This lesson will discuss the economic concept of the price floor and its place in current economic decisions. The most common price floor is the minimum wage the minimum price that can be payed for labor. 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. Price floors are used by the government to prevent prices from being too low.

A price floor is an established lower boundary on the price of a commodity in the market. Price ceiling has been found to be of great importance in the house rent market. It will provide key definitions and examples to assist with illustrating the concept. Floors in wages.

Examples of goods that have had price floors bestowed upon them include farm products and workers. A price floor is the lowest legal price a commodity can be sold at. 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. Price floor has been found to be of great importance in the labour wage market.

Term price floor definition. A price floor must be higher than the equilibrium price in order to be effective. 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. By observation it has been found that lower price floors are ineffective.

However economists question how beneficial. Price floors are also used often in agriculture to try to protect farmers. 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. It has been found that higher price ceilings are ineffective.