Price Control

1909 Words Apr 28th, 2010 8 Pages
Price Controls

Econ 360-002

Sonia Parsa

Sparsa1@gmu.edu

G00509808

Word Count: 1540

Abstract

This paper examines how, in the United States, the government imposes several forms of taxes and price controls and how all individuals are required to pay direct and indirect taxes. It looks at how the approach of taxation and how the constraints of taxation on goods and price controls affect the U.S. economy.
Introduction
Regulations have played a huge role in the political and economic world for centuries. There are various different types of regulation. One regulation that the government imposes under its tax policy is price control, which is not considered to be voluntary. Price control can play two different roles, a price ceiling
…show more content…
We can also use the supply-demand analysis to dissect the labor market when a wage-control is placed by the government (shown in Figure 2). By establishing a minimum-wage law, it mandates a price floor above the equilibrium wage; therefore, the rate of unemployment among unskilled workers increases. When wages increase, a greater number of workers are willing to work while only a small number of jobs will be available at the higher wage. Companies can be more selective in whom they choose to employ causing the least skilled and inexperience to be excluded. [pic] Figure 2 assumes that workers are willing to work for more hours if paid a higher wage. We graph this relationship with the wage on the vertical axis and the quantity of workers on the horizontal axis. Combining the demand and supply curves for labor allows us to examine the effect of the minimum wage. We will start by assuming that the supply and demand curves for labor will not change as a result of raising the minimum wage. This assumption has been questioned. If no minimum wage is in place, workers and employers will continue to adjust the quantity of labor supplied according to price until the quantity of labor demanded is equal to the quantity of labor supplied, reaching equilibrium price, where the supply and demand curves intersect. Evidence- Minimum Wage Basic theory says that raising the minimum wage, which is a type of price-control, helps