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Define Price Floor. What is the common purpose of fixation of floor price by the government? Explain any one likely consequence of this nature of intervention by the government.

Answer» <html><body><p></p>Solution :<a href="https://interviewquestions.tuteehub.com/tag/price-1165141" style="font-weight:bold;" target="_blank" title="Click to know more about PRICE">PRICE</a> floor is the minimum price <a href="https://interviewquestions.tuteehub.com/tag/fixed-457597" style="font-weight:bold;" target="_blank" title="Click to know more about FIXED">FIXED</a> for a <a href="https://interviewquestions.tuteehub.com/tag/commodity-923558" style="font-weight:bold;" target="_blank" title="Click to know more about COMMODITY">COMMODITY</a> by the government (above the equilibrium price), which must be paid to the producers for their produce.<br/>The need for price floor arises when the government finds that equilibrium price is too low for the producers.As a result of price floor, the market price is above the equilibrium price, leading to <a href="https://interviewquestions.tuteehub.com/tag/excess-978535" style="font-weight:bold;" target="_blank" title="Click to know more about EXCESS">EXCESS</a> supply. This often leads to illegal selling of their produce by the producers since they are not able to sell the commodity at the price <a href="https://interviewquestions.tuteehub.com/tag/set-11758" style="font-weight:bold;" target="_blank" title="Click to know more about SET">SET</a> by the government.</body></html>


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