MyEconLab Concept Video
You’ve seen the effects of a price ceiling. Let’s now look at the effects of a price floor, a government regulation that places a lower limit on the price at which a particular good, service, or factor of production may be traded. Trading at a lower price than the price floor is illegal.
Price floors are used in many markets, but the one that looms largest is the labor market. The price of labor is the wage rate that people earn. Demand and supply in the labor market determine the wage rate and the quantity of labor employed.
Figure 7.5 illustrates ...