Price Floor On Minimum Wage

A price floor is the legal limit on how low a price may be set for a good.

Price floor on minimum wage. Because this is the most popular and recognizable example of a price floor we will concentrate on it for the rest of this lesson 2. When the price floor in this case the minimum wage is set the demand falls substantially even as the supply in the market is still rather high. Government enforce price floor to oblige consumer to pay certain minimum amount to the producers.

However price floor has some adverse effects on the market. Legislating a minimum wage is commonly seen as an effective way of giving raises to low wage workers. Or in the case of the minimum wage an example of a price floor to improve living standards.

For a price floor to be effective the minimum price has to be higher than the equilibrium price. In modern western countries labor is the primary recipient of price floors 1 in particular the government imposes a minimum wage making it illegal for an employer to pay a worker less than a certain amount per hour. In this case it is a surplus of workers suppliers of labor more of whom are willing to work in minimum wage jobs than there are employers demanders willing to hire at that wage.

Price floors may also be implemented through private groups for instance the nfl used to impose a floor on the resale value of tickets. Government set price floor when it believes that the producers are receiving unfair amount. A price floor is a government or group imposed price control or limit on how low a price can be charged for a product good commodity or service.

For example the uk government set the price floor in the labor market for workers above the age of 25 at 7 83 per hour and for workers between the ages of 21 and 24 at 7 38 per hour. More specifically it is defined as an intervention to raise market prices if the government feels the price is too low. A price floor must be higher than the equilibrium price in order to be effective.

A price floor or a minimum price is a regulatory tool used by the government. Price floor is enforced with an only intention of assisting producers. A government set minimum wage is a price floor on the price of labour.