ECON 101 Lecture Notes - Lecture 14: Deadweight Loss, Price Floor, Economic Equilibrium

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22 Dec 2020
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Price floor: minimum price buyers are required to pay for a good or service. Government pushing prices up instead of down. Example: agricultural products to support farmers" incomes. Minimum wage: a legal floor on the wage rate, the price of labor. Note: if change in price is what changes consumers" minds it"s movement along the curve. Price floor is put above equilibrium for it to be effective. Government can buy unwanted surplus and find ways to dispose of the goods. Pay exporters to sell products at a loss overseas. Can pay farmers not to produce products at all. Generous minimum wage has contributed to a high rate of unemployment and flourishing illegal labor market. Binding or effective: price floor is above equilibrium. Implies market price can be higher than the price floor . If market price is below the set price floor it is illegal.

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