Okuzeka
Economics vocabulary · Markets, Supply and Demand

Price floor

Meaning in economics, with examples

nounCommon term

In economics, price floor means: A legal minimum price for a good or service, set by the government to protect producers or workers; the minimum wage is the best-known example.

In Turkish: taban fiyat, asgari fiyat

How it is used

If set above the equilibrium price, a price floor creates a surplus, such as unsold crops that the state may have to buy. Government purchase prices for farm products such as wheat and hazelnuts work in a similar way.

Example sentences

  1. The price floor for milk has led to a large surplus of milk powder.

  2. Economists see the minimum wage as a price floor in the labour market.

Common collocations

  • set a price floor
  • binding price floor
  • minimum price
  • support price
  • price ceilingA legal maximum price that sellers are allowed to charge for a good or service, such as a limit on rents or on bread prices.
  • minimum wageThe lowest hourly, daily or monthly pay that employers are legally allowed to pay workers, set by the government or by law.
  • surplusAn amount left over: in a market, more supply than demand at the current price; in public finance or trade, more income than spending.
  • subsidyMoney or other support that a government gives to producers or consumers to lower the price of a product or to encourage an activity.
  • equilibriumA situation in which supply and demand are equal, so there is no pressure for the price or the quantity to change.

More terms: Markets, Supply and Demand

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This page explains English vocabulary for learners. It is not financial advice.