Define Business Price Floor

A price floor must be higher than the equilibrium price in order to be effective.

Define business price floor.

A lower limit set by a government on the price that can be charged for a product or service. 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. By observation it has been found that lower price floors are ineffective. This control may be higher or lower than the equilibrium price that the market determines for demand and supply.

The equilibrium price commonly called the market price is the price where economic forces such as supply and demand are balanced and in the absence of external. 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. Minimum wage is an example of a wage floor and functions as a minimum price per hour that a worker must be paid as determined by federal and state governments. Limit beyond which a cost will not be allowed to fall.

Floors in wages. The lowest preconceived price that a seller will accept. Real life example of a price ceiling. Definition of price floor.

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