Overview
Price floors are important economic tools used by governments to ensure that prices do not fall below a certain level, protecting producers and ensuring fair wages. However, they can lead to unintended consequences such as market surpluses and inefficiencies. Understanding price floors helps student...
Key Terms
Example: Minimum wage is a common price floor.
Example: A surplus occurs when a price floor is set above equilibrium price.
Example: At market equilibrium, there is no surplus or shortage.
Example: Setting price floors is a form of government intervention.
Example: Price floors can change consumer purchasing habits.
Example: Producers may increase supply when a price floor is set.
Related Topics
Price Ceilings
A maximum price set by the government that can be charged for a good or service.
intermediateSupply and Demand
The relationship between the quantity of a good that producers are willing to sell and the quantity that consumers are willing to buy.
beginnerMarket Structures
Different types of market environments, such as perfect competition and monopoly, that affect pricing and output.
advancedKey Concepts
minimum pricemarket equilibriumsurplusgovernment intervention