1. Since the harmful consequences of the minimum wage law (a classic price floor
ID: 1140086 • Letter: 1
Question
1. Since the harmful consequences of the minimum wage law (a classic price floor) fall disproportionately on unskilled and often poor workers, we might expect this group of society to be opposed to such a law. And yet, unskilled workers and the poor are often in favor of the minimum wage law.Why do you think members of this group of society are in favor of the minimum wage law?
2.Some people seem to think that a price ceiling on crude oil will reduce the price of gasoline to consumers. Use economic reasoning to explain why this thinking is erroneous.
1. Since the harmful consequences of the minimum wage law (a classic price floor) fall disproportionately on unskilled and often poor workers, we might expect this group of society to be opposed to such a law. And yet, unskilled workers and the poor are often in favor of the minimum wage law.
Why do you think members of this group of society are in favor of the minimum wage law?
2.Some people seem to think that a price ceiling on crude oil will reduce the price of gasoline to consumers. Use economic reasoning to explain why this thinking is erroneous.
1. Since the harmful consequences of the minimum wage law (a classic price floor) fall disproportionately on unskilled and often poor workers, we might expect this group of society to be opposed to such a law. And yet, unskilled workers and the poor are often in favor of the minimum wage law.
Why do you think members of this group of society are in favor of the minimum wage law?
2.Some people seem to think that a price ceiling on crude oil will reduce the price of gasoline to consumers. Use economic reasoning to explain why this thinking is erroneous.
Explanation / Answer
Answer to the first question has been provided :
1) Minimum wage laws are like price floors . The wage is not allowed to fall beyond it with regulations . So for the minimum wage to be effective it has to be set above the equilibrium market wage . So this price floor causes surplus of labor in the market and hence unemployment .
The effect of this unemployment falls badly on unskilled labourers since after the imposition of this law they are the one to lose jobs first . Skilled labour is often scarce and usually are highly paid but unskilled labourers are in abundant and can be induced to work overtime at little higher wage , so they are hired less .
But even after this this group supports the law because this law protects them from exploitative nature of employers . The equilibrium or market clearing wage is sometimes so meagre that even basic sustainance is not possible in that wage , so a minimum wage law guarantees a sufficient income for fulfillment of basic requirements .
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.