Price Floors

Price Floors

Price Floors state that a good or service cannot be sold below a legislated price. Price Floors lead to excesses in the supply of goods or services because the demand is diminished as the price rises. For instance, minimum wages are common in many countries. When effective, it will raise wages of many people. It may create unemployment due to firms not being able to pay for employees while maintaining reasonable profits, unless the government chooses to subsidize firms. [JP] {EC}