Define Price Floor In Economic Terms

This control may be higher or lower than the equilibrium price that the market determines for demand and supply.

Define price floor in economic terms.

It will provide key definitions and examples to assist with illustrating the concept. 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 a government or group imposed price control or limit on how low a price can be charged for a product good commodity or service. By observation it has been found that lower price floors are ineffective.

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. It has been found that higher price ceilings are ineffective. A price floor must be higher than the equilibrium price in order to be effective. Price floor has been found to be of great importance in the labour wage market.

The opposite of a price ceiling is a price floor which sets a minimum price at which a product or service can be sold. 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 its aim is to increase companies interest in manufacturing the product and increase the overall supply in the market place. This term to describe an economic deficiency.