Define The Term Price Floor

Definition of price floor.

Define the term price floor. 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 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 price ceiling definition is the maximum price allowed for a particular good or service. This is because if the price floor is set below the equilibrium then the price floor is set below the market value.

For example the iphone sells for around 699. 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. The government used price supports to maintain the price floor floor base a. A price floor establishes the minimum legal price for a good or service.

This control may be higher or lower than the equilibrium price that the market determines for demand and supply. Price floor synonyms price floor pronunciation price floor translation english dictionary definition of price floor. Price floor floor below which prices are not allowed to fall. Definition of a price floor.

A price floor is an established lower boundary on the price of a commodity in the market. In general price ceilings contradict the free enterprise capitalist economic culture of the united states. 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. In other words the firm is able to sell at a higher price than the minimum price set.

By observation it has been found that lower price floors are ineffective. Yet if the price floor was set at 500 below the equilibrium it would have no effect. Floors in wages. The price floor definition in economics is the minimum price allowed for a particular good or service.

Here is a short video further explaining the concept of a price floor. A lower limit set by a government on the price that can be charged for a product or service.