Price and quantity controls.
Quantity exchanged price floor.
Minimum wage and price floors.
When a price floor is set above the equilibrium price as in this example it is considered a binding price floor.
At the price ceiling there is a surplus of orange juice.
Price floors are used by the government to prevent prices from being too low.
A price floor is only effective when set above the equilibrium price below left.
The quantity demanded at the price ceiling will equal the quantity supplied.
The amount exchanged in the market will be limited by the smaller of the two quantities q d in this case.
Percentage tax on hamburgers.
At the price floor the quantity demanded is less than quantity supplied which is a surplus situation.
When the price floor is set below the equilibrium.
Price floors are also used often in agriculture to try to protect farmers.
Example breaking down tax incidence.
The result of the price floor is that the quantity supplied qs exceeds the quantity demanded qd.
A price floor is the lowest legal price a commodity can be sold at.
The intersection of demand d and supply s would be at the equilibrium point e 0.
A price floor example.
The effect of government interventions on surplus.
Taxation and dead weight loss.
The quantity supplied at the price ceiling will equal the quantity exchanged.
There are units that are socially efficient to trade but aren t traded because their value is less than the price floor.
The quantity demanded at the price ceiling will equal the quantity.
Taxes and perfectly inelastic demand.
The most common price floor is the minimum wage the minimum price that can be payed for labor.
At equilibrium the quantity demanded is 700 units.
Taxes and perfectly elastic demand.
The result is a quantity supplied in excess of the quantity demanded qd.
However a price floor set at pf holds the price above e 0 and prevents it from falling.
