The government-imposed lower limit on the price that may be charged for a particular good or service. What this lower limit is called?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → Price floor.
A price floor is a minimum legal price set by the government below which a good or service cannot be sold.
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It is a lower limit on price, usually imposed to protect producers (e.g., farmers) from very low market prices.
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Example: The Minimum Support Price (MSP) for crops in India is a classic example of a price floor.
In contrast:
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A price ceiling is the upper limit on price (e.g., rent control).