Which real-world example illustrates a price floor?
A. Rent control laws
B. Minimum wage laws
C. Anti-price gouging laws
D. Price caps on gasoline
Answer (2)
The real-world example illustrating a price floor is B. Minimum wage laws, which set a legal limit on the lowest wage workers can be paid. These laws are intended to ensure fair pay and help maintain a living wage for workers. Other options provided are examples of price ceilings, not price floors.
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A price floor is a government-imposed limit on how low a price can be charged for a product. To illustrate this concept, let's look at the options provided and identify which one represents a real-world example of a price floor:
Rent control laws : These are usually price ceilings, which limit how high the price (rent) can be charged, not a floor.
Minimum wage laws : This is the correct answer. Minimum wage laws set the lowest legal hourly wage that can be paid to workers. It's a price floor because it establishes the minimum price (wage) that can be charged for labor, preventing wages from falling below a certain level. This law is intended to protect workers from unduly low wages and to ensure a basic standard of living.
Anti-price gouging laws : These laws typically restrict how much prices can increase in certain situations (like emergencies), acting more like price ceilings.
Price caps on gasoline : Like anti-price gouging laws, these are price ceilings, restricting how high the price can go rather than establishing a minimum price.
Therefore, the real-world example that illustrates a price floor is Minimum wage laws (Option B) . Price floors like the minimum wage are used to ensure fair pay for workers and help them maintain a basic standard of living. They can also influence employment rates, as higher wages might affect the demand for labor.
