ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Minimum wages are formulated from the demand-supply curve of labour. This helps the government ensure higher wages and a good standard of living for the workers. But this has a flip side too. Price floor leads to a lesser number of workers than in case of equilibrium wage.

Detailed explanation-2: -A price floor occurs in a market when government imposes a minimum price that is above equilibrium. The mandated price functions as a “floor” because it prevents the buyers and sellers from negotiating lower prices and reaching equilibrium.

Detailed explanation-3: -Minimum wages have been defined as the minimum amount of remuneration that an employer is required to pay wage earners for the work performed during a given period, which cannot be reduced by collective agreement or an individual contract.

Detailed explanation-4: -Price floors are sometimes called “price supports, ” because they support a price by preventing it from falling below a certain level.