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In a brief paragraph 1) Suppose you are the Economic Advisor to the President of a...

In a brief paragraph

1) Suppose you are the Economic Advisor to the President of a country, would you advise him to increase Minimum Wage to $15 per hour? Yes or No? Please explain in a paragraph providing reasons/consequences, using economic concepts of Price Control/Price Floor

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Answer #1

The answer is no.

It is because of the pressure of inflation threat. When people’s income increases suddenly there is a chance of irrational consumption from the part of the consumer. He becomes ready to purchase products at a high price than before or more at the same price than before. The increase in wage rate will lead to wage induced inflation. A small dose of inflation is advisable for economic growth. But inflation at a sudden pace with high rate is not appreciated.

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