Microeconomics Price Floor Graph

You ll notice that the price floor is above the equilibrium price which is 2 00 in this example.

Microeconomics price floor graph. A price floor is the lowest legal price that can be paid in markets for goods and services labor or financial capital. Yes price floors and price ceilings do have a role to play in the market. Perhaps the best known example of a price floor is the minimum wage which is based on the view that someone working full time should be able to afford a basic standard of living. A few crazy things start to happen when a price floor is set.

When the price floor in this case the minimum wage is set the demand falls substantially even as the supply in the market is still rather high. Simply draw a straight horizontal line at the price floor level. A price floor is the lowest price that one can legally charge for some good or service. In the price floor graph below the government establishes the price floor at price pmin which.

This graph shows a price floor at 3 00. However that doesn t mean that they are efficient. Drawing a price floor is simple. Perhaps the best known example of a price floor is the minimum wage which is based on the normative view that someone working full time ought to be able to afford a basic standard of living.

A price floor is defined as a government intervention to raise market prices if the price is too low. The pitfalls of the minimum wage is clearly indicated through graph 1 1. The opposite of a price floor is a price ceiling.