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Explain briefly how the price floor works in a market if the government applies it. Use...

Explain briefly how the price floor works in a market if the government applies it. Use a specific real life example to argue for the application of it.

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Answer #1

In a demand and supply curve the price floor is a situation that is above the equilibrium condition

An equilibriumis a point where demand and supply curve intersects

It is generally found that lower price floors are ineffective

If we talk from the side labour or farmers market then it is very effective

Example of it can be a minimum wage laws which is passed by many government it and minimum wage has to paid to the workers

For example, in many country some times farmers faces huge losses due to to natural disasters like flood, cyclones, drought etc then government ensures that the price of the goods that is produced by the farmers will not go below a certain price which is also called price flooring

The best example of this is India which is mostly Agrarian based economy

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