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.
Short term benefits of price floor.
Over the long term price controls can lead to problems such as shortages rationing inferior product quality and.
While price ceilings might seem to be an obviously good thing for consumers they also carry disadvantages.
They are a way to regulate prices and set either above or below the market equilibrium.
Consumers adjust habits over time.
By observation it has been found that lower price floors are ineffective.
A price ceiling is the legal maximum price for a good or service while a price floor is the legal minimum price.
National and local governments sometimes implement price controls legal minimum or maximum prices for specific goods or services to attempt managing the economy by direct intervention price controls can be price ceilings or price floors.
Maximum prices can reduce the price of food to make it more affordable but the drawback is a maximum price may lead to lower supply and a shortage.
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.
But this is a control or limit on how low a price can be charged for any commodity.
Short run versus long run.
Linked to another good that changes over time more substitutes available later knock offs competition.
Price floor has been found to be of great importance in the labour wage market.
There are different advantages and disadvantages depending on whether you are talking about suppliers consumers or the governing body.
At best price controls are only effective on an extremely short term basis.
Long run lets consumers producers fully adjust to price change.
The basics of price ceilings.
Price controls can take the form of maximum and minimum prices.
They are used to increase the income of farmers producing goods it is obvious in this situation that by incresaseing the price above equilibrum governemt is assisting the producers and not the consumers a higher price is going to mean a higher income for the producer.
Demand more price elastic in long run.
Price floor are used to give producers a higher income.
Certainly costs go down in the short term which can.
For the government the floor price is useful as they can.
Price floors are also used often in agriculture to try to protect farmers.
A price floor is the lowest legal price a commodity can be sold at.
