what is meant by price floor explain it effects with the help of diagram
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Definition: 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. By observation, it has been found that lower price floors are ineffective. Price floor has been found to be of great importance in the labour-wage market.
Effect:A price floor set above the market equilibrium pricehas several side-effects. Consumers find they must now pay a higher price for the same product. ... The equilibrium price is determined when the quantity demanded is equal to the quantity supplied.
Effect:A price floor set above the market equilibrium pricehas several side-effects. Consumers find they must now pay a higher price for the same product. ... The equilibrium price is determined when the quantity demanded is equal to the quantity supplied.
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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. ... This graph shows a price floor at $3.00. You'll notice that the price floor is above the equilibrium price, which is $2.00 in this example.
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