Definition Of Floor Price In Economics

Definition of floor price.

Definition of floor price in economics.

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. A legally established minimum price. Dictionary term of the day articles subjects businessdictionary. 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 an established lower boundary on the price of a commodity in the market. 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. 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.

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. 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. Prices below the price floor do not result in an. Price floors and price ceilings are government imposed minimums and maximums on the price of certain goods or services.

By observation it has been found that lower price floors are ineffective. Term price floor definition. This is usually done to protect buyers and suppliers or manage scarce resources during difficult economic times. The lowest preconceived price that a seller will accept.