How does minimum wage affect society? Chapter 6 Section 3

Social Goals vs. Market Efficiency Market outcomes can be distorted in order to achieve social goals Market outcomes can be distorted in order to achieve social goals Price Ceilings Price Ceilings A maximum legal price that can be charged for a product A maximum legal price that can be charged for a product Rent control is an example of a price ceiling Rent control is an example of a price ceiling Can have mixed results Can have mixed results Lower prices results in shortage of product or shift in allocation of resources by suppliers Lower prices results in shortage of product or shift in allocation of resources by suppliers

Price Floors Price Floors Lowest legal price that can be paid for a good or service Lowest legal price that can be paid for a good or service Minimum wage is an example of a price floor Minimum wage is an example of a price floor Figure 6.5 on pg. 151 Figure 6.5 on pg. 151 Higher wages can cause a surplus of labor because not everybody will have a job Higher wages can cause a surplus of labor because not everybody will have a job