Price Floors Quizlet

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.

Price floors quizlet. Price floors are used by the government to prevent prices from being too low. 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. A price floor is the lowest legal price a commodity can be sold at. With a price floor the government forbids a price below the minimum.

A rise in input costs happens. Quiz questions will focus on topics such as binding price ceiling. Consequences of price floors. Price floors are also used often in agriculture to try to protect farmers.

A price floor is the lowest price that one can legally charge for some good or service. The most common price floor is the minimum wage the minimum price that can be payed for labor. 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. When the price is above the equilibrium the quantity supplied will be greater than the quantity demanded and there will be a surplus.

Final exam ch. Like price ceiling price floor is also a measure of price control imposed by the government. A minimum allowable price set above the equilibrium price is a price floor. About this quiz worksheet.

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. If a price floor was set at 320 what quantity would be purchased. In the 1970s. Learn vocabulary terms and more with flashcards games and other study tools.

Productive inefficiency the high price allows inefficient firms with high costs of production to stay in buisness. 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. But this is a control or limit on how low a price can be charged for any commodity. The opposite of a price ceiling is a price floor which sets a minimum price at which a product or service can be sold.

Implementing a price floor.