Price Floors Produce

Price floors are sometimes called price supports because they support a price by preventing it from falling below a certain level.

Price floors produce.

Price floors are used by the government to prevent prices from being too low. Price floor has been found to be of great importance in the labour wage market. For example the uk government set the price floor in the labor market for workers above the age of 25 at 7 83 per hour and for workers between the ages of 21 and 24 at 7 38 per hour. At price 210 per metric ton farmers are happy to produce quantity q f but the consumers demand only q d.

Around the world many countries have passed laws to create agricultural price supports. Price floors are also used often in agriculture to try to protect farmers. By observation it has been found that lower price floors are ineffective. For a price floor to be effective it must be set above the equilibrium price.

The most common price floor is the minimum wage the minimum price that can be payed for labor. This will result in excess supply which equals q f minus q d. 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. Farm prices and thus farm incomes fluctuate sometimes widely.

Any employer that pays their employees less than the specified. The price floors are established through minimum wage laws which set a lower limit for wages. 210 the price floor is going to affect the market.