What Is The Price Floor

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.

What is the price floor. Price floors are also used often in agriculture to try to protect farmers. It tends to create a market surplus because the quantity supplied at the price floor is higher than the quantity demanded. 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 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. A price floor is the lowest legal price a commodity can be sold at.

Prices below the price floor do not result in an. This control may be higher or lower than the equilibrium price that the market determines for demand and supply. A price floor is an established lower boundary on the price of a commodity in the market.

Price floors are used by the government to prevent prices from being too low. Price floor has been found to be of great importance in the labour wage market. Its aim is to increase companies interest in manufacturing the product and increase the overall supply in the market place.