A minimum price legislation is also called

Step 1: Analyze the question The question asks for another name for "minimum price legislation," which is a law that sets the lowest price at which a good or service may be sold.

Step 2: Explain the concept Governments sometimes step in to fix prices when the market price is considered unfair to buyers or sellers. There are two main types:

• Price floor (minimum price): The lowest legal price. It is set above the equilibrium price to protect producers. Examples are minimum wage and guaranteed minimum prices for farm produce such as cocoa or grains. A seller cannot legally charge below this level.
• Price ceiling (maximum price): The highest legal price. It is set below the equilibrium price to protect consumers. Examples are controlled prices of petrol or rent control.

Step 3: Go through the options

• A. Price ceiling: This is a maximum price, so it is the opposite of what the question asks.
• B. Price floor: This is a minimum price, so it matches.
• C. Price control: This is a general term covering both floors and ceilings. It is too broad and does not specifically mean a minimum price.
• D. Price mechanism: This is the free market's system of demand and supply determining prices, with no government legislation involved.

Step 4: Answer Minimum price legislation is also called a price floor, which is option B.

Effect to remember: A price floor set above equilibrium causes a surplus (supply exceeds demand), because producers want to sell more at the higher price while buyers want to purchase less.

Exam tip: Think of a building. The floor is the lowest level, so a price floor is the lowest price. The ceiling is the top, so a price ceiling is the highest price. Floor = minimum, ceiling = maximum.