Definition Of Floor Price In Economics

Term price floor definition.

Definition of floor price in economics. The lowest preconceived price that a seller will accept. Dictionary term of the day articles subjects businessdictionary. 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. 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 in economics is a minimum price imposed by a government or agency for a particular. 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. Examples of goods that have had price floors bestowed upon them include farm products and workers. Its aim is to increase companies interest in manufacturing the product and increase the overall supply in the market place.

By observation it has been found that lower price floors are ineffective. A price floor is an established lower boundary on the price of a commodity in the market. 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. This is usually done to protect buyers and suppliers or manage scarce resources during difficult economic times.

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. 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 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.