Government Expenditure Price Floor

A price floor is an established lower boundary on the price of a commodity in the market.

Government expenditure price floor.

If the government agrees to purchase a specific maximum of unsold products at the price floor it. The presentation below goes through this. Taxation and dead weight loss. The effect of government interventions on surplus.

Notice that if the price floor were for whatever reason set below the equilibrium price it would be irrelevant to the determination of the price in the market since nothing would prohibit the price from rising to equilibrium. Minimum wage and price floors. How price controls reallocate surplus. This is the currently selected item.

More specifically it is defined as an intervention to raise market prices if the government feels the price is too low. In this case since the new price is higher the producers benefit. A price floor or a minimum price is a regulatory tool used by the government. 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.

Federal spending for agriculture. Price and quantity controls. Government expenditure to purchase the surplus. A price floor is the lowest legal price that can be paid in markets for goods and services labor or financial capital.

Percentage tax on hamburgers. For higher level you need to be able to use a price floor diagram to be able to calculate changes in consumer expenditure firm s revenue and the cost to the government of buying any surplus. With a price floor the government forbids a price below the minimum. Price floors can have differing effects depending on other government policies.

Click on the screenshot or link below to open the presentation.