“Price ceilings prevent a price from rising above a certain level. When a price ceiling is set below the equilibrium price, quantity demanded will exceed quantity supplied, and excess demand or shortages will result. Price floors prevent a price from falling below a certain level. When a price floor is set above the equilibrium price, quantity supplied will exceed quantity demanded, and excess supply or surpluses will result. Price floors and price ceilings often lead to unintended consequences.”
In this 1-2 page paper, analyze what happens when a higher minimum wage is enacted (raising a price floor on the price of labor). Will the number of workers hired change? Why? What might be an unintended consequence of a higher minimum wage law designed to help low-income workers?
Next, analyze what happens when the price of rent is regulated so that prices are kept artificially low (a price ceiling). What will happen to the availability of apartments? Why? What might be an unintended consequence of a rent control wage law designed to help low-income renters?
