What is price floor
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Yogita Ingle 6 years, 9 months ago
Price Floor: It means the minimum price fixed by the government for a commodity in the market. It seems paradoxical.
(i) Each firm employs labour up to the point where the marginal revenue product of labour equals the wage rate.
(ii) With supply curve remaining unchanged when demand curve shifts rightward (leftward). the equilibrium quantity increases (decreases) and equilibrium price increases with fixed number of firms.
(iii) With demand curve remaining unchanged when supply curve shifts rightward (leftward), the equilibrium quantity increases (decreases) and equilibrium price decrease (increases) with fixed number of firm.
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