Business, Legal & Accounting Glossary
A price floor is the minimum amount for which a product or service can be sold. Price floors are often imposed by governments to protect the supplier of the product or service in question.
In the United States, the government has imposed price floors on sugar. This means that the sugar producers are guaranteed a minimum price for their sugar, regardless of what the market will pay.
If the price floor of sugar (imposed by the US government) is $100 per unit, and the market can only afford or is only willing to pay $90 per unit, the government will pay the suppliers the difference.
Additionally, the government will purchase any unsold sugar, thereby guaranteeing the sugar producers a minimum market.
Taxi fares in Singapore have both price floors and price ceilings. This means that the fares begin at a certain level above zero, but no higher.
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This glossary post was last updated: 27th March, 2020 | 0 Views.