Price Floor Example Economics

The federal minimum wage in 2016 was 7 25 per hour although some states and localities have a higher minimum wage. A price floor means that the price of a good or service cannot go lower than the regulated floor.

Government Intervention Minimum Price Price Floor Ib Notes

Bowen produces 1000 kilograms of tomatoes and will sell to the local groceries at 10 000 instead of the 3000 he would have made a decade ago.

Price floor example economics. Often the government sets a minimum price that a farmer would get for a particular product. This helps to stabilize the farmers income so that they are not discouraged from producing more. Common examples of price floors are the minimum wage the price that employers pay for labor currently.

For example the uk government set the price floor in the labor market for workers above the age of 25 at 7 83 per hour and for workers between the ages of 21 and 24 at 7 38 per hour. The best examples for price floor are the minimum wage and agricultural sector. However other price floors exist in any sector that the government is trying to protect such as agricultural goods or other sensitive industries.

Perhaps the best known example of a price floor is the minimum wage which is based on the view that someone working full time should be able to afford a basic standard of living. A minimum wage law is the most common and easily recognizable example of a price floor. The price floors are established through minimum wage laws which set a lower limit for wages.

In this way the price floors protect farmers as well as encourage them to increase the production of a variety of produce.

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