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Which one of the following is an example of price floor?

Which one of the following is an example of price floor?

The Correct Answer is Option 1, i.e Minimum Support price (MSP) for Jowar in India. 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.

What does the government set price floors on?

Governments set price floors for a number of reasons, as the University of Minnesota explains, but the typical result is an increase of supply and decreased demand. Price floors may be combined with price ceilings to set controls in both directions.

Which would be an example of a government price ceiling?

A government imposes price ceilings in order to keep the price of some necessary good or service affordable. For example, in 2005 during Hurricane Katrina, the price of bottled water increased above $5 per gallon. In many markets for goods and services, demanders outnumber suppliers.

What are examples of price floors and price ceilings?

The most important example of a price floor is the minimum wage. A price ceiling is a maximum price that can be charged for a product or service. Rent control imposes a maximum price on apartments in many U.S. cities. A price ceiling that is larger than the equilibrium price has no effect.

What is price floor?

Definition: 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. Price floor leads to a lesser number of workers than in case of equilibrium wage.

What is meant by price floor explain using a suitable example?

A price floor or a minimum price is a regulatory tool used by the government. The most common example of a price floor is the minimum wage. This is the minimum price that employers can pay workers for their labor. The opposite of a price floor is a price ceiling.

What is an example of a price floor what does it create?

An example of a price floor is minimum wage laws, where the government sets out the minimum hourly rate that can be paid for labour. In this case, the wage is the price of labour, and employees are the suppliers of labor and the company is the consumer of employees’ labour.

Which is an example of a price floor quizlet?

Examples of price floors include the minimum wage and farm price supports. A price ceiling leads to a shortage, if the ceiling is binding because suppliers will not produce enough goods to meet demand. A price floor leads to a surplus, if the floor is binging, because suppliers produce more goods than are demanded.

Which of the following is an example of a price floor quizlet?

What is a price floor quizlet?

Price Floor Definition. The minimum legally allowable price for a good or service, set by the government. Sellers cannot charge a price lower than the price floor.

Why are price floors used by the government quizlet?

1. To provide income support for sellers by offering them prices for their products that are above market determined prices. 2. To protect low skilled, low wage workers by offering them a wage that is above the level determined by the market.

Why are price floors implemented by governments?

Governments impose a price floor because they judge the policy to have an effect more valuable than the consequences. A local government, for example, might set a price floor on parking fees in a municipal area.

What are the effects of price floor?

The effects of a price floor include lost gains from trade because too few units are traded (inefficient exchange), units produced that are never consumed (wasted production), and more costly units produced than necessary (inefficient production). A price ceiling is a maximum price.

What is the impact of an effective price floor?

The impact of an effective price floor is generally surplus of inventory, but only if the market equilibrium price falls below that floor. A price floor acts as a safety net accessed only if the price falls low enough. For example, the federal government purchases the surplus…

What does a price floor create?

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.