Price Floors Benefit Producers

Producers favor price floors because when binding price floors increase price above the equilibrium and may increase producer surplus.

Price floors benefit producers.

The most notable example is minimum wage. They have been used in agriculture to increase farmers income. Minimum prices can increase the price producers receive. Increase tax revenue for governments.

Price floor are used to give producers a higher income. If price floor is less than market equilibrium price then it has no impact on the economy. Price floors are only an issue when they are set above the equilibrium price since they have no effect if they are set below market clearing price. They are used to increase the income of farmers producing goods it is obvious in this situation that by incresaseing the price above equilibrum governemt is assisting the producers and not the consumers a higher price is going to mean a higher income for the producer.

For instance if a government wants to encourage the production of coffee beans it may establish one in the coffee bean market. Governments put in place price floors in markets with inelastic demand and very low prices naturally. Price ceilings are primarily targeted to help while price floors generally benefit. However minimum prices lead to over supply and mean the government have to buy surplus.

More specifically it is defined as an intervention to raise market prices if the government feels the price is too low. Consumers and spenders benefit from price ceilings. In this case since the new price is higher the producers benefit. Governments usually set up price floors to assist producers.

Government enforce price floor to oblige consumer to pay certain minimum amount to the producers. Price floor is enforced with an only intention of assisting producers. However price floor has some adverse effects on the market. Price floor definition a price floor or a minimum price is a regulatory tool used by the government.

Producers and sellers benefit from price floors. Sellers and producers of labor benefit from legal minimum wages. Government set price floor when it believes that the producers are receiving unfair amount.