Define The Term Price Floor

The price floor definition in economics is the minimum price allowed for a particular good or service.

Define the term price floor.

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. Here is a short video further explaining the concept of a price floor. By observation it has been found that lower price floors are ineffective. Price floor synonyms price floor pronunciation price floor translation english dictionary definition of price floor.

Yet if the price floor was set at 500 below the equilibrium it would have no effect. In a highly competitive beauty industry the owner of images beauty salon decides to undercut her local competitors by offering identical services for half the price. Definition of price floor. This is because if the price floor is set below the equilibrium then the price floor is set below the market value.

In other words the firm is able to sell at a higher price than the minimum price set. 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 lower limit set by a government on the price that can be charged for a product or service. A minimum wage is an example of a price floor.

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. This control may be higher or lower than the equilibrium price that the market determines for demand and supply. For example the iphone sells for around 699. The price ceiling definition is the maximum price allowed for a particular good or service.

A price floor is an established lower boundary on the price of a commodity in the market. Price floor has been found to be of great importance in the labour wage market. Definition of a price floor. The government used price supports to maintain the price floor floor base a.

Floors in wages. In general price ceilings contradict the free enterprise capitalist economic culture of the united states.