Define The Term Price Floor

A lower limit set by a government on the price that can be charged for a product or service.

Define the term price floor.

Definition of price floor. A price floor establishes the minimum legal price for a good or service. The price floor definition in economics is the minimum price allowed for a particular good or service. A price floor is an established lower boundary on the price of a commodity in the market.

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. In general price ceilings contradict the free enterprise capitalist economic culture of the united states. In a highly competitive beauty industry the owner of images beauty salon decides to undercut her local competitors by offering identical services for half the price. The government used price supports to maintain the price floor floor base a.

By observation it has been found that lower price floors are ineffective. Price floor synonyms price floor pronunciation price floor translation english dictionary definition of price floor. Yet if the price floor was set at 500 below the equilibrium it would have no effect. Here is a short video further explaining the concept of a price floor.

Price floor floor below which prices are not allowed to fall. For example the iphone sells for around 699. 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. The price ceiling definition is the maximum price allowed for a particular good or service.

Definition of a price floor. A minimum wage is an example of a price floor. This control may be higher or lower than the equilibrium price that the market determines for demand and supply. In other words the firm is able to sell at a higher price than the minimum price set.

Price floor has been found to be of great importance in the labour wage market. This is because if the price floor is set below the equilibrium then the price floor is set below the market value.