Question

Price controls and Price ceilings. Should we raise the minimum wage? Explain at least in 2 paragraph why? Give some advantage and disadvantage in the economy.

Answer 1

Price controls by the government are an important means to control prices of goods from falling too low or rising too high. But they lead to deadweight losses in the society. Government fixes minimum wage for workers in the form of price floor. It has been o served that government has been revising these wages based on the price index of the economy. Some of the advantages include ensuring a minimum standard of living for workers and also helps in reducing inequality.

On the flip side, these minimum wages have certain disadvantages. They lead to increased unemployment because of rise in the wages which reduces labor demand. Most of the industries are moving towards automation to reduce labor cost like kiosks to order food in fast food restaurants etc.

Thus.to prevent h employment the rise in wages should occur in controlled manner.