Productive inefficiency the high price allows inefficient firms with high costs of production to stay in buisness.
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Price floor has been found to be of great importance in the labour wage market.
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The most common price floor is the minimum wage the minimum price that can be payed for labor.
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But this is a control or limit on how low a price can be charged for any commodity.
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.
A price floor is the lowest legal price a commodity can be sold at.
Price floors are used by the government to prevent prices from being too low.
They are usually implemented as a means of direct economic intervention to manage the affordability.
Consequences of price floors.
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.
Like price ceiling price floor is also a measure of price control imposed by the government.
Price controls are government mandated legal minimum or maximum prices set for specified goods.
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Price floors are also used often in agriculture to try to protect farmers.
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By observation it has been found that lower price floors are ineffective.
