Government Price Controls
Answer the following questions fully and clearly. Be sure to explain why you answered as you did, stating the logical reasons for reaching your conclusions.
There are federal and state laws setting minimum wages for workers. There are also city laws setting price ceilings for housing rents.
Why are there laws setting minimum wages for workers and maximum rents for housing?
The U.S congress first instituted a minimum wage with the Fair Labor Standard Act of 1938 to ensure worker’s can afford minimally adequate standard of living.(Mankiw,2008). However, minimum wage laws may raise the income of some workers, but they also cause other workers to be unemployed. ...view middle of the document...
It has been stated that price controls caused shortages or surpluses.
Do rent controls cause shortages or surpluses, and why?
Rent controls are price ceiling.Rent control causes a shortage.However, the initial shortage caused by rent control is small. when rent control depresses rents below the equilibrium level, the quantity of apartments supplied falls substantially, and the quantity of apartment demanded rises substantially and the results is a large shortage of housing.
Do minimum wage laws cause shortages or surpluses, and why?
The minimum wage is a price floor and it causes a surplus. It causes a surplus of unskilled workers. for example, teenagers who are least skilled and least experienced members of the labor force.
What are the advantages and disadvantages of minimum wage laws for:
The advantage of minimum wage increase can cause increase in their pays and increase their purchasing power.The living status gets better for them. The disadvantage is mainly on teenage labor. Studies show high minimum wage causes unemployment, encourages to drop out of school, and prevent some unskilled workers from getting the on-the-job training they need. (Mankiw,p121)
The biggest advantage for...