Price Floor Graph Minimum Wage. It sets employers a minimum or floor by which they are legally allowed to pay an employee. Suppose the local government imposes a price floor.
Suppose the local government imposes a price floor. A factor contributing to the deadweight loss is that employers are now much more wary when hiring. If the minimum wage is set above the equilibrium wage it.
For a price floor to be effective it must be set above the equilibrium price.
For example many governments intervene by establishing price floors to ensure that farmers make enough money by guaranteeing a minimum price that their goods can be sold for. A whether the equilibrium price is lower than the price floor and b relative elasticity of demand to supply. In our supply and demand analysis a minimum wage is a simple application of a binding price floor. The most common example of a price floor is the minimum wage.
