Define Price Floor In Economics

Term price floor definition.

Define price floor in economics.

A price floor is the lowest legal price a commodity can be sold at. A price floor is the lowest legal price that can be paid in markets for goods and services labor or financial capital. Price floor definition. The most common price floor is the minimum wage the minimum price that can be payed for labor.

Floors in wages. A legally established minimum price. It will provide key definitions and examples to assist with illustrating the concept. 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 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. 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. Both on paper and in real life there is a solid relationship between economics public choice and politics.

This control may be higher or lower than the equilibrium price that the market determines for demand and supply. This lesson will discuss the economic concept of the price floor and its place in current economic decisions. Similarly a typical supply curve is. A price floor is an established lower boundary on the price of a commodity in the market.

By observation it has been found that lower price floors are ineffective. 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 a minimum price enforced in a market by a government or self imposed by a group. 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.

Price floors are used by the government to prevent prices from being too low. Minimum wage is an example of a wage floor and functions as a minimum price per hour that a worker must be paid as determined by federal and state governments. It tends to create a market surplus because the quantity supplied at the price floor is higher than the quantity demanded. The economy is one of the major political.

Examples of goods that have had price floors bestowed upon them include farm products and workers.