Define A Price Floor

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.

Define a price floor. Limit beyond which a cost will not be allowed to fall. Real life example of a price ceiling. 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. The government used price supports to maintain the price floor floor base a.

A price floor must be higher than the equilibrium price in order to be effective. 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. Floors in wages. Price floor floor below which prices are not allowed to fall.

Price ceiling has been found to be of great importance in the house rent market. By observation it has been found that lower price floors are ineffective. Price ceiling 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 floor has been found to be of great importance in the labour wage market.

This control may be higher or lower than the equilibrium price that the market determines for demand and supply. It has been found that higher price ceilings are ineffective. The opposite of a price ceiling is a price floor which sets a minimum price at which a product or service can be sold.