Consiquence Of A Price Floor

Worse off because they must pay a higher price and consumer surplus falls.

Consiquence of a price floor.

Price floors are used by the government to prevent prices from being too low. The most common price floor is the minimum wage the minimum price that can be payed for labor. For a price floor to be effective the minimum price has to be higher than the equilibrium price. But this is a control or limit on how low a price can be charged for any commodity.

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. A price floor must be higher than the equilibrium price in order to be effective. A price floor is the lowest legal price a commodity can be sold at. In the absence of the price floor the equilibrium price will be reached and there will be no excess demand or excess supply.

Price floors are also used often in agriculture to try to protect farmers. Consequences of price floors. Effect of the price floor on consumers. Like price ceiling price floor is also a measure of price control imposed by the government.

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. The govt has to spend money to buy the surplus which involves opportunity cost. The most common example of a price floor is the minimum wage.