What is a government
What is one benefit?
What is one cost?
A government price floor is a type of price control by the government to set some lower bounds on the price of a good in the market. This is generally done to ensure that the market price of a particular good does not fall below a certain limit which will otherwise affect the financial status of the producer of that good.
It can be of 2 types :
1) Binding price floor : Where price set is more than the equilibrium price
2) Nonbinding price floor : Where price set is less than the equilibrium price
Example: Minimum wage laws
Under this law, the government sets up the price floor for the wages in the labor market. In case of unskilled labors, such price floor is binding stating that wages should not fall below a ceratin limit.
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