PRICE FLOOR Meaning and
Definition
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A price floor is a term used in economics to describe a government or industry-imposed minimum price that must be paid for a certain good or service. It is a legal restriction that prohibits the price from falling below a certain level. The main purpose of implementing a price floor is to protect producers or sellers by ensuring that they receive a minimum level of revenue.
When a price floor is established, it creates a surplus in the market because the quantity supplied exceeds the quantity demanded at that price. This surplus occurs because the price is set above the equilibrium price, which is the price at which the quantity demanded equals the quantity supplied in a free market. As a result, some producers will not be able to sell all of their goods or services at the mandated price.
Price floors are commonly used for agricultural products, labor markets, and to address concerns related to income inequality. For example, governments may set price floors on certain agricultural commodities, such as wheat or milk, to ensure that farmers receive a fair price. Similarly, minimum wage laws can be seen as a form of price floor, establishing a minimum hourly rate that employers must pay to their workers. This helps protect low-wage workers from exploitation and ensures a basic standard of living.
Overall, price floors are a tool used to influence market dynamics, protect certain groups, and maintain a desired level of economic stability. However, they can also lead to unintended consequences, such as reduced efficiency, market distortions, and surpluses that require government intervention.
Common Misspellings for PRICE FLOOR
- orice floor
- lrice floor
- -rice floor
- 0rice floor
- peice floor
- pdice floor
- pfice floor
- ptice floor
- p5ice floor
- p4ice floor
- pruce floor
- prjce floor
- prkce floor
- proce floor
- pr9ce floor
- pr8ce floor
- prixe floor
- prive floor
- prife floor
Etymology of PRICE FLOOR
The etymology of the term "price floor" can be understood by analyzing the individual words that make up the phrase.
1. Price: The word "price" originated from the Latin word "pretium", which means "value" or "cost". It has been used in English since the 13th century, referring to the amount of money or goods required to acquire something.
2. Floor: The word "floor" comes from the Old English word "flōr", which referred to the bottom surface of a room or building. It evolved from the Proto-Germanic word "flōraz" and is related to the Old Norse word "flóð", meaning "floor" or "ground". Over time, "floor" took on additional meanings, including a lower limit or level.
When combined, "price floor" refers to a minimum level set for the price of a particular good or service.
Similar spelling words for PRICE FLOOR
