Floor Price Means. A price floor is a government- or group-imposed price control or limit on how low a price can be charged for a product good commodity or service. An effective price floor.
By observation it has been found that lower price floors are ineffective. A floor price would mean an end to free services. Price floors are also used often in agriculture to try to protect farmers.
A price floor is the lowest amount at which a good or service may be sold and still function within the traditional supply and demand model.
The primary objective is to protect the buyers and sellers from adverse price movements. A point to note is that a government may set both price floor and ceiling for a product. If the price floor is set at 250 this means that the customer must now pay the extra 50 cents for each doughnut. An effective price floor.
