Answer to Question #212470 in Macroeconomics for Fen

Question

Consider low-skilled workers in garment factories receiving guaranteed wage rate by the government. Explain what type of price control the wage rate is and how this would make workers better off?

Answer 1

A price ceiling is a legal limit placed by the government on the price of a certain commodity or service in the marketplace; the idea is that a rising price will hit the "ceiling" and will not be permitted to rise any further. For example, after a natural disaster, the local or state government may set price limits on commodities like bottled water, electric generators, and gasoline to prevent merchants from profiting from the crisis for them to favor workers.