Ch 4 - Laws of Supply & Demand
Supply & Demand of Labor
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A price floor is the lowest legal price that can be paid in a market for goods and services, labor, or financial capital. Price floors prevent a price from falling below a certain level. When a price floor is set above the equilibrium price, there will be an excess supply or surplus. Perhaps the best-known example of a price floor is the MINIMUM WAGE.
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A price ceiling is the highest legal price allowed in a market for goods and services, labor, or financial capital. Price ceilings prevent a price from rising above a certain level. When a price ceiling is set below the equilibrium price, the quantity demanded will exceed the quantity supplied, and excess demand or shortages will result. A great example of a price ceiling is RENT CONTROL.
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