A MINIMUM PRICE LEGISLATION IS ALSO CALLED
- A. price ceiling
- B. price mechanism
- C. price control
- D. price floor ✓
The answer to the question is: D. price floor
A minimum price legislation, also known as a price floor, is a government-imposed limit on how low a price can be charged for a particular good or service. This policy is designed to protect producers by ensuring that they receive a fair and sustainable income for their products. When the market price falls below the set minimum, the government may intervene to purchase the surplus or restrict production in order to maintain the minimum price level.
Price floors are commonly used in agricultural markets to support farmers by guaranteeing them a minimum income for their crops. However, they can lead to surpluses and inefficiencies if the minimum price is set above the equilibrium price determined by supply and demand.
