ECON 111 Lecture Notes - Lecture 46: Price Floor, Equilibrium Point, Demand Curve
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A price floor is the lowest legal price that can be paid in a market for goods and services, labor, or financial capital. 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. The federal minimum wage at the end of 2014 was . 25 per hour, which yields an income for a single person slightly higher than the poverty line. As the cost of living rises over time, congress periodically raises the federal minimum wage. Price floors are sometimes called price supports because they support a price by preventing it from falling below a certain level. Around the world, many countries have passed laws to create agricultural price supports. Farm prices, and thus farm incomes, fluctuate sometimes widely. So even if, on average, farm incomes are adequate, some years they can be quite low.
