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MC Qu. 85 A price floor is:...

MC Qu. 85 A price floor is:...

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A Price floor is the minimum price at which any commodity/service can be sold at. Generally if the equilibrium price achieved through the interaction of demand and supply is very low, then the government can set a set a price floor which is set higher than that market clearing equilibrium price.

For example: Minimum Wage for a service is the legal price floor/wage that has to be offered for a given type of service.

Or say Minimum Support Price for agricultural commodities is also like a minimum price (price floor) at which these commodities can be bought for.

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