Answer to Question #167805 in Economics of Enterprise for Ghil

Question

1.   If the minimum wage were increased to ₱75 per hour, how many of your classmates do you think would look for a job? How many jobs do you expect they would find? How is this an example of a price floor?

Answer 1

With an increase in price floor, many students would have looked for jobs. The number of students looking for job would have been more than the equilibrium level. There would have been a shortage of jobs at this wage level. This is an example of price floor because the employers are not allowed to pay a wage lower than the prescribed wage.