Which one of the following is an example of a price floor ?
[amp_mcq option1=”Minimum Support Price (MSP) for Jowar in India” option2=”Subsidy given to farmers to buy fertilizers” option3=”Price paid by people to buy goods from ration shops” option4=”Maximum Retail Price (MRP) printed on the covers/packets of goods sold in India” correct=”option1″]
This question was previously asked in
UPSC CDS-2 – 2019
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.