Question

1. Who is the winner and loser when the price floor is implemented?

For example, the minimum wage law. When the minimum wage law is implemented, the demand(firm) decreases, and the supply(labor) increases. Then it generates unemployment. So, low-wage workers will accept a lower wage than the minimum wage. This may against the purpose of the minimum wage law. In this case, who is the winner and loser? The firm will pay more than before, because of the minimum wage law. And low-wage workers will accept lower wages compared to the minimum wage, but the wage at this may be higher than before the minimum hourly wage existed. I'm very confused.

2. Who is the winner and the loser when the price ceiling is implemented?

For example, the renter fee of the housing. If the price floor exists, it generates a shortage of housing. Who is the winner and loser between supplier(house owner) and consumer(tenants)?

Answer 1

Price floor is the price which is set by the government above the market equilibrium price. Government set a minimum wage rate in labour market to control the exploitation of labour.

Government will set the price that can be paid to workers as an hourly rate. When wage is set above the market equilibrium level so supply will be more. More labour want to do work but employers will not hire much labour at high wage rate. In this stage, employers will cut the labour work as they will continue to self drive movement such as buying the machines and robotics . At high wage rate . Employers want more work from machines and robotics instead of workers. So umemployment will be generated . More people want yo do work in labour market but employers are not hire. Thus surplus labour will be available in the labour market .

So it can help the labour who are getting the employment at minimum wage rate . Winner are labours who are getting employment at minimum wage rate. And losers are the producers and employers who have to pay more after price flooring.