Price Floor
A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product. Price floors are used by governments and other organizations to protect consumers from prices that are too low, and to help producers receive a fair price for their goods and services. Price floors are also used to protect certain industries from foreign competition. Price floors are the opposite of price ceilings, which limit how high a price can be charged for a product.
History of Price Floors
Price floors have been used since ancient times, when governments would set minimum prices for goods and services. In the United States, price floors were first used in the early 20th century to protect farmers from low prices. The U.S. government has since used price floors to protect other industries, such as the steel and oil industries. Price floors are also used in labor markets, where they are known as minimum wage laws.
Comparison of Price Floors
| Price Floor | Price Ceiling |
|---|---|
| Sets a minimum price | Sets a maximum price |
| Protects producers | Protects consumers |
| Can lead to shortages | Can lead to surpluses |
Summary
A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product. Price floors are used to protect consumers from prices that are too low, and to help producers receive a fair price for their goods and services. Price floors are the opposite of price ceilings, which limit how high a price can be charged for a product. For more information about price floors, visit the websites of the U.S. Department of Agriculture, the U.S. Department of Labor, and the Federal Trade Commission.
See Also
- Price Ceiling
- Minimum Wage
- Supply and Demand
- Price Discrimination
- Price Elasticity
- Monopoly
- Oligopoly
- Subsidy
- Tariff
- Tax
