Disequilibrium Governments
Transcript of Disequilibrium Governments
PRICE FLOOR:A law that prevents a price from
falling below a certain level.
In the USA, minimum wage is an example of a price floor dictating that unskilled workers cannot be paid lower than $7.40 per hour. This is helpful to people who are trying to
survive on a minimum wage job alone.
PRICE FLOOR:A price floor is a price higher than
the market equilibrium price. It creates a surplus, and prevents the
market from naturally moving
back to the equilibrium price.
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PRICE FLOOR:A price floor
creates a surplus. With a price floor on the wages of
unskilled labor (minimum
wage), a surplus of unskilled
labor is created. This contributes to unemployment.
PRICE FLOOR:Unemployment is created because employers are
demanding a lower quantity of
laborers, and because people are
more willing to supply their labor (to work) when wages are higher.
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PRICE CEILING:A law that prevents a price from
rising above a certain level.
A price ceiling on rent for apartments was imposed by the US government to protect
soldiers returning from WWII who could not afford to pay the quickly climbing rent prices.
PRICE CEILING:A price ceiling is a price lower than
the market equilibrium price. It creates a shortage, and prevents the
market from naturally moving
back to the equilibrium price.
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PRICE CEILING:
A price ceiling creates a
shortage. With a price ceiling
on rent prices, a shortage of
apartments is created.