Price Floor Economics Definition

A price floor must be higher than the equilibrium price in order to be effective.

Price floor economics definition. Economic definition of price floor. A price floor or a minimum price is a regulatory tool used by the government. 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.

More specifically it is defined as an intervention to raise market prices if the government feels the price is too low. 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.

Examples of goods that have had price floors bestowed upon them include farm products and workers. The most common price floor is the minimum wage the minimum price that can be payed for labor. A price floor is an established lower boundary on the price of a commodity in the market.

A price floor in economics is a minimum price imposed by a government or agency for a particular. Its aim is to increase companies interest in manufacturing the product and increase the overall supply in the market place. A legally established minimum price.

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. Term price floor definition. A price floor is the lowest amount at which a good or service may be sold and still function within the traditional supply and demand model.

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. By observation it has been found that lower price floors are ineffective. 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.