Answer to Question #159658 in Economics of Enterprise for sahan lakmal

Question

What are the methods further to take to price floor successfully implement in the market?

Answer 1

Price Floor

A price floor is implemented to give the lowest legal price for goods and services, labor or financial capital (Krugman, & Wells, 2013). Therefore one of the ways that the government can implement price floors in the market is by getting involved in the market. The government starts by buying goods and services at high prices leading to an increase in the supply of the goods or service. Once the market forces for the price of goods are above a certain price, the government declares the minimum price of the goods and services as policy. This happens when the equilibrium is achieved when the goods and services' price is at the lowest legal price of goods and services.

 

References

 

Krugman, P. R., & Wells, R. (2013). Microeconomics. New York, NY: Worth Publishers.