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Under what circumstances would a minimum wage be a nonbinding price floor? Under what circumstances would a living raise be a binding price floor?
A price floor imposed like minimum wages becomes non-binding when the price imposed is lessthan the equilibrium price and the price control will become ineffective as the suppliers arealready receiving amount more than the price floor.A price floor imposed like minimum wages becomes binding when the price imposed is morethan the equilibrium price and the price control will become effective as the suppliers arecurrently receiving amount less than the price floor.
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Chapter 4
Labor and Financial Markets
How Markets Work
The Economics of the Public Sector
The Economics of Labor Markets
Kameryn W.
September 15, 2021
Problem 24
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Let's talk about price folks. Specifically, one surprise for binding. A nonbinding Let's say that we have here the market for labor, and it said that a minimum wage laws passed, saying that we cannot pay employees anything less than $3 per hour. Well, this price floor, it's non binding. What does that mean? It means it is below the equilibrium and dozing affect the equilibrium. It's military vehicle. Abram here was, uh, $5. This tells us that passing a law saying that you can't pay people less than $3 doesn't really do anything when people were already earning $5. This price for is nonbinding, however, that saying that they race it toe livable standard. Um, it will not livable standard, but literally increased it to $7 today. Now the price floor. It's above the equilibrium. Now this price floor is finding this minimum wage is binding because now people learning settlers before, But now you're forcing them to earn $7 again when the price floors below. The equilibrium is not binding, but if it's above the equilibrium
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