Define The Term Price Floor

Price floor synonyms price floor pronunciation price floor translation english dictionary definition of price floor.

Define the term price floor.

This control may be higher or lower than the equilibrium price that the market determines for demand and supply. Price floor has been found to be of great importance in the labour wage market. Here is a short video further explaining the concept of a price floor. A minimum wage is an example of a price floor.

In other words the firm is able to sell at a higher price than the minimum price set. In general price ceilings contradict the free enterprise capitalist economic culture of the united states. A lower limit set by a government on the price that can be charged for a product or service. 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.

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. By observation it has been found that lower price floors are ineffective. Definition of price floor. The price ceiling definition is the maximum price allowed for a particular good or service.

The government used price supports to maintain the price floor floor base a. 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. 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. Yet if the price floor was set at 500 below the equilibrium it would have no effect.

A price floor establishes the minimum legal price for a good or service. Floors in wages. For example the iphone sells for around 699. Definition of a price floor.

This is because if the price floor is set below the equilibrium then the price floor is set below the market value. The price floor definition in economics is the minimum price allowed for a particular good or service.