A Price Floor Is A Legally Imposed Price

Price controls can be price ceilings or price floors.

A price floor is a legally imposed price. Although both a price ceiling and a price floor can be imposed the government usually only selects either a ceiling or a floor for particular goods or services. Suppose 20 000 people in pennsylvania work in fast food restaurants for the federal minimum wage of 7 25 hour. The price floor acts as a minimum price that constrains the market price if the equilibrium market price would have been below the ceiling absent market intervention. A price ceiling is the legal maximum price for a good or service while a price floor is the legal minimum price.

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. If the state of pennsylvania increases its. Question 2 a price floor is a legally imposed 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.

A price floor must be higher than the equilibrium price in order to be effective. A price ceiling is a legally imposed price. 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. The price floor acts as a minimum price that constrains the market price if the equilibrium market price would have been below the ceiling absent market intervention.

A price floor provides a bottom limit think of a physical floor in a room for a price. Assume that all fast food restaurants employ many minimum wage workers.