Purchase Solution

market consequences of a price floor

Not what you're looking for?

Ask Custom Question

3-4 page paper

Attachments
Purchase this Solution
Solution Summary

This explanation provides you a comprehensive argument relating to market consequences of a price floor

Solution Preview

Write a 3-4 page paper that directly addresses the following questions:
1. In economic terms, what are the market consequences of a price floor? Discuss the economic implications of implementing a legal minimum wage.
Price floor refers to the lower limit of the price that can be charged for a product. This limit is set by an association, a consortium or by the government. This level is higher than the equilibrium price. The market consequences of such an action are that the purchasers are forced to pay a higher price for the product. Many buyers reduce their consumption of that product. On the other hand since the suppliers feel assured that they will get a higher price for their goods step up production. This leads to a situation where there is more supply than demand. A price flooring may have the consequences illegal violations of price floor.
The economic consequence of implementing a price floor is that unemployment is generated. The reason is that the minimum wages are set above the equilibrium wage rate. Again there are two effects of a minimum wage rate. On one side, more people seek jobs as the higher wages attracts more persons to work. On the other hand the higher minimum wages discourage the businesses to hire more people. The result is an increase in unemployment.
2. What do the laws of supply and demand predict would be the result of an immediate removal of minimum wage in terms of the price of labor and the quantity available?
From the perspective of supply and demand, if there was removal of minimum wages, the price of labor expressed in terms of wages would immediately fall. In addition, the quantity available would also decrease because fewer people would be willing to work. A new ...

Solution provided by:
Hatim Baxamusa, MBA
Education
  • BSc , University of Calcutta
  • MBA, Eastern Institute for Integrated Learning in Management
Recent Feedback
  • "I read your comments, and thank you for this feedback. Do I need to find other studies that applied this methodology Ive used? That's where I'm stuck at."
  • "Thank you kindly sir. "
  • "Excellent and well explained. --Thank you kindly. "
  • "Awesome notes. I appreciate you."
  • "I have the follow-up project and I will assign that to you very soon. "
Purchase this Solution
Free BrainMass Quizzes
Learning Lean

This quiz will help you understand the basic concepts of Lean.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Team Development Strategies

This quiz will assess your knowledge of team-building processes, learning styles, and leadership methods. Team development is essential to creating and maintaining high performing teams.

Change and Resistance within Organizations

This quiz intended to help students understand change and resistance in organizations

Situational Leadership

This quiz will help you better understand Situational Leadership and its theories.

View More Free Quizzes
Related BrainMass Solutions

  • Market consequences of a price floor

    312959 In economic terms, what are the market consequences of a price floor? The market consequences of a price floor are discussed.

  • The Minimum Wage Impact Assessed

    In economic terms, what are the market consequences of a price floor? A price floor is set by the government to protect the producer of the good to which the price floor has been attached.

  • Price Controls and Equilibrium

    The market consequences of a price floor are that equilibrium is not reached in the market for labor. As a result the price of the labor remains fixed because of the price floor at a higher level than equilibrium price.

  • Economics

    //After discussing the price floor and the example of price floor, now we will discuss the elements, which assist to prevent price from falling. We will also discuss the consequences of price floor on the market.

  • Business cycles, supply and demand, price of labor, minimum wage law

    295054 Business cycles, supply and demand, price of labor, minimum wage law 1. In economic terms, what are the market consequences of a price floor? Discuss the economic implications of implementing a legal minimum wage. 2.

  • Market Efficiency and Government Intervention

    The unintended consequences are that there is higher level of unemployment. A price floor above the equilibrium wage means minimum wage laws cause unemployment.

  • Explain difference between a price floor and a price ceiling

    For example, if folks are buying nuts at $5 a pound and you put in a floor of $1 a pound, nothing will change. The market price is not interrupted.

  • What are price controls?

    reason, a price ceiling above the eq. price does not change anything (since market price is low, so setting a max. doesn't matter) - If a price floor is higher than the eq. price, then price will be forced to increase to the level of the price floor

  • Price floors and market equilibrium

    453339 Price floors and market equilibrium Starting from the original supply and demand positions, show what happens if the government puts a price floor above the market (equilibrium) price to help producers of root beer.

View More Related Solutions