Talk:Price floor

From Wikipedia, the free encyclopedia
Jump to: navigation, search
WikiProject Economics (Rated Start-class, Low-importance)
WikiProject icon This article is within the scope of WikiProject Economics, a collaborative effort to improve the coverage of Economics on Wikipedia. If you would like to participate, please visit the project page, where you can join the discussion and see a list of open tasks.
Start-Class article Start  This article has been rated as Start-Class on the project's quality scale.
 Low  This article has been rated as Low-importance on the project's importance scale.

2007 comments[edit]

I am perturbed by the omniscience the page creator displays in knowing the elascity of demand for not just one or two jobs, but all jobs, is invariably low across the spectrum.

"Because the supply of labor tends to be relatively inelastic"

How could this possibly be said, particulary considering that the elascities for things like fast foods employees and software engineers must be radically different (Krueger + Card arguements aside), and furthermore, the minimum wage tends to effect only the lowest paid, and perhaps, most "expendable" jobs in society.

The article then continues into how a fiscal explosion, panned by the late-great Milton Friedman (Who was keynesian for a time), can be used to offset the, apparently small, effects on labor! Poitical!

I think the removal of the following passage (as I will remove) is justified in that it is completely unfounded and generally political. I would agree with its placement back into the article only if it were heavily cited:

"Because the supply of labor tends to be relatively inelastic, the sum of total wages paid to all workers usually raises if a price floor is set even if fewer people are being employed. Still there remains an excess supply (of labor) that the government must deal with. The most direct way of doing that is for the government to lessen the effect of the price floor by simply increasing demand (effectively buying the excess supply) - which, in the case of labor, means creating more jobs in the public sector (for example by starting new public projects, such as building roads or schools) and hiring people to do those jobs. In addition, there are also a number of macroeconomic policies that can reduce unemployment under certain circumstances."

  • sigh* It's Wikipedia and this article was probably edited by some political yahoo instead of anything close to resembling an academic... Mgunn 20:51, 26 January 2007 (UTC)

Fair enough, but there needs to be some citation for "the supply of labor tends to be relatively inelastic." I have not seen definitive proof of that, empirical or theoretical.

Questionable logic[edit]

1) Consumers find they must now pay a higher price for the same product. As a result, they reduce their purchases or drop out of the market entirely. Meanwhile, suppliers find they are guaranteed a new, higher price than they were charging before. As a result, they increase production.

If consumers reduce purchases, what "guarantees" higher prices? If consumers reduce purchases, why is this an incentive to increase production?

2) A price floor must be greater than the equilibrium price in order to be effective.

This isn't true if the purpose of the price floor is to eliminate the lower extremes in what is a variable quantity. The writer of the article forgets that an equilibrium point is a form of average. In the case of wages, for instance, a minimum wage could be set below the market equilibrium yet still prevent the worst abuses whereby some workers are being paid a pittance. Such a minimum wage is a social instrument more than it is an economic one. (talk) 17:32, 23 June 2012 (UTC)