Price Floor Economics Definition. 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. For a price floor to be effective the minimum price has to be higher than the equilibrium price.
Such limits are usually part of a program to protect a given industry and keep the domestic economy strong but they can have unintended consequences. A price floor is a minimum price enforced in a market by a government or self-imposed by a group. 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.
Examples of goods that have had price floors bestowed upon them include farm products and workers.
A price floor must be higher than the equilibrium price in order to be effective. For a price floor to be effective the minimum price has to be higher than the equilibrium price. Such limits are usually part of a program to protect a given industry and keep the domestic economy strong but they can have unintended consequences. A price floor must be higher than the equilibrium price in order to be effective.
