Price Floors Quizlet

Implementing a price floor.

Price floors quizlet.

A price floor is the lowest price that one can legally charge for some good or service. 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. In the 1970s. Real life example of a price ceiling.

About this quiz worksheet. Like price ceiling price floor is also a measure of price control imposed by the government. Price floors are used by the government to prevent prices from being too low. Consequences of price floors.

Notice that if the price floor were for whatever reason set below the equilibrium price it would be irrelevant to the determination of the price in the market since nothing would prohibit the price from rising to equilibrium. Learn vocabulary terms and more with flashcards games and other study tools. They don t face incentives to cut costs by using more efficient production methods because the high price offers them protection from lower cost competitors. Price floors are also used often in agriculture to try to protect farmers.

But this is a control or limit on how low a price can be charged for any commodity. When society or the government feels that the price of a commodity is too low policymakers impose a price floor establishing a minimum price above the market equilibrium. Final exam ch. An increase in supply or a shift of the supply curve to the right occurs when.

A price floor is the lowest legal price a commodity can be sold at. When the price is above the equilibrium the quantity supplied will be greater than the quantity demanded and there will be a surplus. A minimum allowable price set above the equilibrium price is a price floor. Quiz questions will focus on topics such as binding price ceiling.

Perhaps the best known example of a price floor is the minimum wage which is based on the view that someone working full time should be able to afford a basic standard of living. Productive inefficiency the high price allows inefficient firms with high costs of production to stay in buisness. A rise in input costs happens. The most common price floor is the minimum wage the minimum price that can be payed for labor.

With a price floor the government forbids a price below the minimum.