The Minimum Wage Impact Assessed
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Price Controls and Equilibrium: The issue of price setting and price controls is great political and social as well as economic interest; it's often very hard to separate these dimensions. Consider an article that deals with the always hot topic of the minimum wage law. This is an area of great political, social, and economic interest, and it illustrates the difficulty in separating these dimensions in real life.
1. In economic terms, what are the market consequences of a price floor? What are the economic implications of implementing a legal mimimum wage.
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?
3. Should the minimum wage be raised in order to provide workers with a better standard of living? Why or Why not?
4. Is the minimum wage law an effective poverty-fighting measure? What is one alternative policy.
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Solution Summary
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. There are two possible outcomes for the market in price floor setting. If the price set is lower than the price already being paid in the market, the market is unaffected. If the price set, is higher than the price in the current market, then consumers usually reduce the quantity of the product they purchase or stop ...
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Price Controls and Equilibrium
1. 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. There are two possible outcomes for the market in price floor setting. If the price set is lower than the price already being paid in the market, the market is unaffected. If the price set, is higher than the price in the current market, then consumers usually reduce the quantity of the product they purchase or stop purchasing the product all together. The producers often assume the market size will remain the same and profits will simply be expanded, so they produce more. This means unsold goods are produced and supply is greater than demand. The industry suffers as producers lose money from the investment in additional resources needed to increase production.
What are the economic implications of implementing a legal ...
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