Which one of the following is an example of a price floor ?

Minimum Support Price (MSP) for Jowar in India

Subsidy given to farmers to buy fertilizers

Price paid by people to buy goods from ration shops

Maximum Retail Price (MRP) printed on the covers/packets of goods sold in India

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This question was previously asked in

UPSC CDS-2 – 2019

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A price floor is a minimum price set by the government or a group, above the equilibrium price, to protect sellers. Minimum Support Price (MSP) for agricultural products in India is a classic example of a price floor. The government announces MSPs for various crops, ensuring that farmers receive a guaranteed minimum price for their produce, even if market prices fall below this level.

A price floor is a minimum legal price. If set above the equilibrium price, it is binding and can lead to surpluses.

Option B (Subsidy) is a direct payment, not a price control. Option C (Price at ration shops) is typically a subsidized price below the market price, closer to a price ceiling concept. Option D (MRP) is a Maximum Retail Price, which is a price ceiling (a maximum legal price).

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