Econ 101 Price Floor

For a price floor to be effective the minimum price has to be higher than the equilibrium price.

Econ 101 price floor.

Course summary economics 101. Final exam ch. Terms in this set 7 price floor a price floor is a government set price above equilibrium price it is a tax on consumers and a subsidy to producers. This is a combination of news items.

A price floor is the lowest legal price a commodity can be sold at. 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. The most common example of a price floor is the minimum wage.

Principles of microeconomics has been evaluated and recommended for 3 semester hours and may be transferred to over 2 000 colleges and universities. Textbook chapter 6 2. A price floor is an established lower boundary on the price of a commodity in the market. Price floors defines minimum price price ceilings.

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. For example many governments intervene by establishing price floors to ensure that farmers make enough money by guaranteeing a minimum price that their goods can be sold for. Download this econ 101 class note to get exam ready in less time.