Question

1. What is the effect on our economy of the price control?
2. Often, before the election, we can hear everywhere “THE MINIMUM WAGE MUST BE INCREASED”. After watching this video what is your opinion on minimum wage law?
3. Is price gouging moral? Should it be illegal? Share your thoughts?

Answer 1

(A) PRICE CONTROL -

Price Control is an restriction imposed by the government on the prices of goods and services. In some cases, a maximum limit (Price Ceiling) is established and in some cases, a minimum base is fixed (Price Flooring).

Effects of Price Control-

• Price Ceilings make commodities more affordable specially during high inflationary periods in an economy. However, Price Ceilings results in shortage of supply in an economy in the long run.
• Price Floorings is beneficial for producers as they get a higher price for what they produce. However, in the long run, this will result in over supply of a commodity. The prices that a consumer has to pay for a good increases so, the demand falls and supply increase. Also, there arises a need to impose duties on imports.

(B) MINIMUM WAGE LAW -

Minimum Wage Law is the law which protects the interest of workers by making it compulsory for the employers to employ the workers at or above a given minimum daily or monthly wage rate. Most of the countries have some sort of Minimum Wage Law. The minimum wage rate in the US is $7.25 as of 2018.

Minimum Wage Law is important in order to protect the interests of workers. It helps in prevention of exploitation of employees at the hands of employers. However, in certain countries, the minimum wage rate is very low. For example, in India, the minimum wage rate is $0.75. Thus there is a need to increase the wage rate in such cases where the minimum wage is very low.

(C) PRICE GOUGING-

Price Gouging can be defined as - "sellers increasing price of a goods and services drastically."

Price Gouging usually takes place during a natural calamity or an emergency situation in the country. Since the sellers increase the prices drastically and in an unfair manner to take advantage of an emergency situation, Price Gouging is unethical and immoral. In several states in the US, Price Gouging has been declared illegal by the law. In my opinion, it should be made illegal as raising prices during emergency situations is an unfair practice.