Price Floor Economic Articles 2017

Price floor has been found to be of great importance in the labour wage market.

Price floor economic articles 2017.

A floor price is a minimum amount under which alcohol cannot be sold. A price floor is the lowest legal price a commodity can be sold at. The most common price floor is the minimum wage the minimum price that can be payed for labor. First posted september 20 2017 19 24 12 more stories from western australia.

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. The price floor would be set at 23 34 cwt and would adjust with inflation over time. But if the government can set a price floor why not also a price. A price floor is an established lower boundary on the price of a commodity in the market.

For instance if milk prices were 16 cwt the difference would be 7 34 cwt. Why stop with a minimum wage. Price floors are used by the government to prevent prices from being too low. The argument behind a minimum wage could use a dose of economic reality.

The most common example of a price floor is the minimum wage. For a price floor to be effective the minimum price has to be higher than the equilibrium price. Governments usually set up a price floor in order to ensure that the market price of a commodity does not fall below a level that would threaten the financial existence of producers of the commodity. By observation it has been found that lower price floors are ineffective.

Price floors are also used often in agriculture to try to protect farmers. The floor price was at a 3 per cent premium to tuesday s closing price of rs 428 90 on bse. Payments to farmers would then be 3 30 cwt. For example many governments intervene by establishing price floors to ensure that farmers make enough money by guaranteeing a minimum price that their goods can be sold for.