Loading presentation...

Present Remotely

Send the link below via email or IM


Present to your audience

Start remote presentation

  • Invited audience members will follow you as you navigate and present
  • People invited to a presentation do not need a Prezi account
  • This link expires 10 minutes after you close the presentation
  • A maximum of 30 users can follow your presentation
  • Learn more about this feature in our knowledge base article

Do you really want to delete this prezi?

Neither you, nor the coeditors you shared it with will be able to recover it again.


Price Floors

No description

Comments (0)

Please log in to add your comment.

Report abuse

Transcript of Price Floors

By: Gabi, Amanda, Mohammed, Jannik, and Fabian Price Floors Price floor is a minimum price of a good or service set by a governing body generally to help producers earn more revenue Definition Example of Price Floor Minimum Wage Excess supply:
Change in consumer expenditure:
Change in revenue (gov aid):
Government spending:
Pf x (Qs-Qd) Calculations The price floor MUST be above the equilibrium price to be effective Consequences Original equilibrium at q*,p*
Excess supply
Change in producer income (revenue)
Change in social surplus down
Elasticity of good determines surplus/ revenue changes What Happens in a Price Floor? Producers-
Sell more at higher price
More surplus
Loses tax dollars (ex. health/education)
Deal with bankrupt farmers
Lose a lot of surplus
Higher prices but less product
Tax Payers-
Pay for buying/storing surplus
Foreign "domestic" firms-
Complete with lower priced goods (bankrupt)
Social Surplus (welfare) Lose Protect producers by promising higher prices and possibly higher revenue
Provide a minimum wage for unskilled workers
To decrease the consumption of demerit goods Why Have a Price Floor? Government can buy up the excess supply
Store, Spoil, or Sell
Quantity supplied only Qd Solving the Excess Supply Problem A price floor on labor where producers: employees and consumers: employers
Increase the wage of unskilled worker
May increase labor productivity
Cutbacks on non-wage benefits (ex. paid holidays)
causes excess demand and unemployment
raises firms costs shifting supply resulting in a higher price of a good Surplus Production at Qd
Consumer- Down
Producer- Up
Social- Down
Government Intervention
Consumer- Down
Producer- Up
Social- Up Revenue PED:
Inelastic goods
Revenue up
Elastic goods
Revenue down
Bad PES:
Inelastic goods
Revenue down
Elastic goods
Revenue up
Good Another Example http://www.guardian.co.uk/news/datablog/2012/mar/23/alcohol-minimum-price-supermarket
Full transcript