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loor set above the equilibrium price the market has some side effects. Consumers now find they must pay higher prices for the same product. The result, they reduce their purchases or drop out of the market completely.

 

Meanwhile, vendors are sure to find a new higher price before they were charged. As a result, they increase production. Taken together, these effects mean there is now an excess supply (known as a surplus) of the product in the market.

 

To maintain the price floor over the long term, the government may need to take action to remove it.

 

Minimum wage

 

A historical and current example of the floor price is the minimum wage law, the law specifies the lowest wages a company can pay an employee (employees are suppliers of labor and company as a consumer ).

 

When the minimum wage is set higher than the equilibrium market price for unskilled labor, unemployment is created because many people are looking for jobs than there are jobs available.

 

A minimum wage above the equilibrium wage will cause employers hired fewer workers as well as causing more people to enter the labor market, resulting in a surplus in the amount of labor available. Workers a wage equilibrium will depend on the employee's skills with market conditions. (Robert 2006, p262)

 

For example: This is common in agriculture. Often the government wants to maintain high prices of agricultural commodities to keep a large number of farmers working. To limit redundancy, however, governments often must pay some farmers not to plant crops, which may be known as a subsidy check.

 

Maximum Price (Price ceiling):

 

A price ceiling set below the market price of freedom is more effective. Providers find they can not be responsible for what they were. As a result, some suppliers drop out of the market. This reduced supply. Meanwhile, consumers find they can now buy products for less, so demand increases. Two causes of action exceed the supply demand, which causes a lack of distribution-unless the consumer or other controls are enforced. It can also lead to other forms of non price competition to supply can meet demand. (Jackson, John, 2007, p83)

 

Reduced Quality

 

To supply demand in lawful rates, the most obvious approach is lower cost. However, in most cases, lower costs mean lower quality. During World War II, for example, the food operation by reducing the size of the ceiling and used cheaper materials (e.g., fat本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。