What is a price floor.
An effective price floor will quizlet.
The effective price ceiling will also decrease the price for consumers but any benefit gained from that will be minimized by the decreased sales due to the drop in supply caused by the lower price.
Effect of price floor.
Government set price floor when it believes that the producers are receiving unfair amount.
An effective ceiling price will.
Price floor is enforced with an only intention of assisting producers.
An effective price floor will.
The lowest price that may be charged by law.
An effective price floor will.
Productive inefficiency the high price allows inefficient firms with high costs of production to stay in buisness.
However price floor has some adverse effects on the market.
What is the impact of an effective price floor.
Price floors and ceiling prices.
Surplus of the good if minimum wages are set above the equilibrium wage in the market then the number of workers hired will be the number of people who are willing to work at the prevailing wage.
Result in a product shortage.
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When people feel that prices are unfairly low the government establishes a price floor above the free market.
Result in a product surplus.
Government enforce price floor to oblige consumer to pay certain minimum amount to the producers.
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Result in a product shortage.
They don t face incentives to cut costs by using more efficient production methods because the high price offers them protection from lower cost competitors.
The market forces of supply and demand determine prices and equilibrium quantities but sometimes those amounts are not acceptable to society and policymakers.
An effective price floor is a price that is set by the government above the equilibrium price.
Force some firms in this industry to go out of business.
Result in a product surplus.
Consequences of price floors.
Chapter 7 price ceilings price floors and taxes.
