What Is a Good Example of a Price Floor?
A good example of a price floor is the federal minimum wage in the United States. The minimum wage must be set above the equilibrium labor market price in order to have any significant bearing on the price.
A price floor is the lowest possible price for something, typically set by legal jurisdiction or regulation in order to change the equilibrium price. A price floor helps to buffer some of the human cost and serves the public good, which a truly free market structure may inadvertently harm. Without a minimum wage, the market could run wages to extremes that would hurt the labor force and the larger economy.