Minimum Wage And Its Effect On The Workplace

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Price floor is most commonly defined as a government price control that establishes the minimum allowable price that can be charged for a particular good or service (Ragan, 2013). The most popular and recognisable examples of a price floor is minimum wage. Fundamentally, a minimum wage is the lowest hourly wage that employers can legally pay their employees (MCEE, 2008). For much of the past century, the minimum wage has been a controversial subject among policymakers and economists around the world (change and X). The focus of this paper is to elaborate on the term binding price floor and how it can lead to a surplus of a particular commodity. In line with this focus, the student will relate these findings to the more common practice found in today’s society, this being minimum wage. With this being stated, the student will uncover which groups will most likely be benefited or disadvantaged from an increase in the legal minimum wage, as well as whether minimum wages should be increased, decreased, or eliminated altogether.

First and foremost, whilst a price floor can defined as a price control that sets the minimum permissible price that can be charged for a particular good or service (Ragan, 2013), it can also be distinguished as either binding or non-binding. Ultimately a price floor that is set at or below the equilibrium price has no effect because the free-market equilibrium remains achievable. On the other hand, however, if the price floor is set above the
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