What is meant by the price floor? What are its implications

1.	What is meant by the price floor? What are its implications
Answer» Minimum price ceiling or Price floor means the least price that could be paid for a good or service. It is the price fixed by thegovernment for a good in the market. The government fixes the price on agricultural products and food grains inparticular so that the farmers get their fair price of a commodity which otherwise actually can be sold with too low of aprice.Effects of price floor:(i) Minimum Return: Farmers are ensured with the minimum returns as their products are completely sold in themarket at comparatively higher price. This leads to an increase in their level of income.(ii) Maximum Level of output: The government ensures to buy the full produce of the farmers which are not sold inthe market at the price floor. Hence, they are able to produce the maximum level of output.(iii) Burden on Government: It also puts extra burden on the government revenues. It becomes mandatory for thegovernment to purchase the excess produce, even if it runs a sufficient volume of buffer stocks.\xa0(iv) Higher Taxes: The government also tries to shift the burden (associated with purchasing the excess produce athigher price) to the consumers and the traders in form of higher taxes.

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