Definition Of Floor Price In Economics

Its aim is to increase companies interest in manufacturing the product and increase the overall supply in the market place.

Definition of floor price in economics.

A price floor in economics is a minimum price imposed by a government or agency for a particular. The lowest preconceived price that a seller will accept. Prices below the price floor do not result in an. This is usually done to protect buyers and suppliers or manage scarce resources during difficult economic times.

A legally established minimum price. 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. By observation it has been found that lower price floors are ineffective. A price floor is the lowest legal price that can be paid in markets for goods and services labor or financial capital.

Examples of goods that have had price floors bestowed upon them include farm products and workers. 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. 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. Price floors and price ceilings are government imposed minimums and maximums on the price of certain goods or services.

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 amount at which a good or service may be sold and still function within the traditional supply and demand model. A price floor is an established lower boundary on the price of a commodity in the market. Definition of floor price.