Other Definitions
price floor (dict)
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Price FloorA Price floor is a government-imposed limit on how low a price can be charged for a product. Price floors favor suppliers. Price floors must be above the equilibrium price to be effective (setting a minimum price below the current market price has no effect on behavior). A historical (and current) example of a price floor are minimum wage laws, laws specifying the lowest wage a company can pay an employee (employees are suppliers of labor and the company is the consumer in this case). When there is a minimum wage law, a surplus of labor is created (more people are looking for jobs than can find jobs). With this price floor, those who can find jobs (who were being paid a smaller wage) win (they get a higher wage, but there is unemployment. Also, (in this case) the consumer of the product a company makes who is now paying minimum wage loses, because the cost of inputs and therefore the price of the product increases.
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