A Good Example Of A Price Floor

Government imposed price ceilings on gasoline after some sharp rises in oil prices.

A good example of a price floor.

Both b and c. A price floor is the lowest possible price for something typically set by legal jurisdiction or regulation in order to. Which of the following is an example of a price floor. A price floor is the lowest price that one can legally charge for some good or service.

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. Both b and c. A price floor must be higher than the equilibrium price in order to be effective. The minimum wage must be set above the equilibrium labor market price in order to have any significant bearing on the price.

You ll notice that the price floor is above the equilibrium price which is 2 00 in this example. Simply draw a straight horizontal line at the price floor level. Another example of a price ceiling involved the coulter law regarding the vfl in australia. Agricultural price supports d.

This graph shows a price floor at 3 00. A few crazy things start to happen when a price floor is set. A good example of a price floor is the federal minimum wage in the united states. This law introduced a ceiling wage of 3 in 1925 but it was later abolished in 1968.

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. Similarly a typical supply curve is. The most common example of a price floor is the minimum wage. A price floor is a minimum price enforced in a market by a government or self imposed by a group.

It tends to create a market surplus because the quantity supplied at the price floor is higher than the quantity demanded. Finally price ceilings imposed on food by the government of venezuela led to shortages and hoarding in 2008. 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. For a price floor to be effective the minimum price has to be higher than the equilibrium price.

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. A binding price ceiling imposed on a good leads to excess demand for this good. Real life example of a price ceiling in the 1970s the u s. As a result shortages quickly developed.

A price floor is an established lower boundary on the price of a commodity in the market.