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Real-World Effects of Price Floors

By September 8, 2009

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In Market Distortions - Altering the Supply and Demand Equilibrium I discuss price floors - where the government sets a minimum price above where the market equilibrium price would normally be. In such a situation there is a 'dis-equilibrium' in the market, since the quantity supplied will exceed the quantity demanded at the price floor level.

Don Boudreaux gives a real world example of what happens in the market for minimum wage labor when quantity demanded exceeds quantity supplied: Low-Wage Workers Are Often Cheated, Study Says.

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