GI- Minimum Price/Price Floor

Question 1

To be effective where does a minimum price have to be set

Answer 1

Above the normal free market equilibrium ; if it is set below it will have no impact

Question 2

China’s minimum price

Answer 2

Support programme for their cotton farmers

Question 3

UK national minimum wage

Answer 3

Introduced as a pay floor in the labour market in 1999

Question 4

How does a minimum wage work

Answer 4

Employers cannot legally undercut the current minimum wage rate her hour- this applied both to full time and part time workers

Question 5

Main aims of the minimum wage

Answer 5

1. The equity justification- that every job should offer a fair rate of pay
2. Labour market incentives- boost labour supply
3. Labour market discrimination- sexism

Question 6

If a labour demand is inelastic..

Answer 6

Then a higher minimum wage will cause only a limited contraction on the level of labour demand

Question 7

Alternatives to a minimum wage

Answer 7

• living wage
• income tax reforms
• benefit reforms (politically controversial)