Price floor
Definition. A price floor is a legally imposed minimum price set above the free market equilibrium price, intended to support producers or guarantee a minimum income. Because the controlled price lies above equilibrium, quantity supplied exceeds quantity demanded, creating a persistent surplus.
Examples include minimum wages in labour markets and guaranteed prices for agricultural goods. The government may have to buy up the surplus or accept unemployment in the affected market.
This term belongs to Price Controls: Ceilings and Floors in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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