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Chapter 4: Q. 3 (page 103)

Why is a living wage considered a price floor? Does imposing a living wage have the same outcome as a

minimum wage?

Short Answer

Expert verified

Since a living wage is a suggested minimum wage, it acts like a price floor.

Step by step solution

01

Minimum wage:

Minimum wages have been defined as 鈥渢he minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract鈥�.

02

Step 2

Since a living wage is a suggested minimum wage, it acts like a price floor.

If the living wage is binding, it will cause an excess supply of labor at that wage rate.

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Most popular questions from this chapter

Why is a living wage considered a price floor? Does imposing a living wage have the same outcome as a minimum wage?

In the labour market, what causes a movement along the demand curve? What causes a shift in the demand curve?

In the financial market, what causes a movement along the supply curve? What causes a shift in the supply curve?

A price ceiling will have the largest effect:

a. substantially below the equilibrium price. b. slightly below the equilibrium price.

c. substantially above the equilibrium price. d. slightly above the equilibrium price.

Sketch all four of these possibilities on a demand and supply diagram to illustrate your answer

Select the correct answer. A price floor will usually shift: a. demand b. supply c. both d. neither Illustrate your answer with a diagram
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