Price Floors Definition Economics

A price floor is the lowest legal price a commodity can be sold at.

Price floors definition economics. Start studying economics 4. Price floors and price ceilings. A price floor sets a price level below which price cannot fall intervention buying might be required to prevent a price from falling through its floor level. Price floors are also used often in agriculture to try to protect farmers.

A legally established minimum price. A price floor is the lowest legal price that can be paid in markets for goods and services labor or financial capital. 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. Learn vocabulary terms and more with flashcards games and other study tools.

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

More specifically it is defined as an intervention to raise market prices if the government feels the price is too low. The most common price floor is the minimum wage the minimum price that can be payed for labor. In this case since the new price is higher the producers benefit. Price floors are used by the government to prevent prices from being too low.

This lesson will discuss the economic concept of the price floor and its place in current economic decisions. By observation it has been found that lower price floors are ineffective. Both on paper and in real life there is a solid relationship between economics public choice and politics. 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 will provide key definitions and examples to assist with illustrating the concept. A price floor or a minimum price is a regulatory tool used by the government. 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.

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.