Define Business Price Floor

A lower limit set by a government on the price that can be charged for a product or service.

Define business price floor.

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. Real life example of a price ceiling. The lowest preconceived price that a seller will accept. Floors in wages.

Minimum wage is an example of a wage floor and functions as a minimum price per hour that a worker must be paid as determined by federal and state governments. 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. 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.

Price floor has been found to be of great importance in the labour wage market. 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. This control may be higher or lower than the equilibrium price that the market determines for demand and supply. The opposite of a price ceiling is a price floor which sets a minimum price at which a product or service can be sold.

Definition of price floor.