Consiquence Of A Price Floor

In the absence of the price floor the equilibrium price will be reached and there will be no excess demand or excess supply.

Consiquence of a price floor.

A price floor must be higher than the equilibrium price in order to be effective. 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. Like price ceiling price floor is also a measure of price control imposed by the government. Consequences of price floors.

But this is a control or limit on how low a price can be charged for any commodity. The most common example of a price floor is the minimum wage. Worse off because they must pay a higher price and consumer surplus falls. Effect of the price floor on consumers.

It is legal minimum price set by the government on particular goods and services in order to prevent producers from being paid very less price. A consequence of a price floor is that it interferes with the rationing function of the price mechanism resulting in an excess supply. For a price floor to be effective the minimum price has to be higher than the equilibrium price. 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.

The most common price floor is the minimum wage the minimum price that can be payed for labor. 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. Price floors are also used often in agriculture to try to protect farmers.