Define Business Price Floor

Limit beyond which a cost will not be allowed to fall.

Define business price floor.

Price floor is a price control typically set by the government that limits the minimum price a company is allows to charge for a product or service its aim is to increase companies interest in manufacturing the product and increase the overall supply in the market place. Floors in wages. This control may be higher or lower than the equilibrium price that the market determines for demand and supply. The opposite of a price ceiling is a price floor which sets a minimum price at which a product or service can be sold.

Price floor has been found to be of great importance in the labour wage market. Definition of price floor. The lowest preconceived price that a seller will accept. 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.

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. By observation it has been found that lower price floors are ineffective. Real life example of a price ceiling. 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.

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