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Unformatted text preview: < Q* o Price ceiling either: No effect if ceiling > equilibrium Q ↓ if ceiling < equilibrium • Minimum wage law o Price floor in labor market o If equilibrium price (where wage) > floor price (here, min. wage) o No direct effect o But what if min. wage is > equil. Wage? (low-skill labor) o Equil. Wage is against law o If law enforced, surplus = unemployment o Tradeoff: some will lose job, some will keep job and earn more • Depends on responsiveness of employers to higher wages • International trade o Foundation is comparative advantage o (same for intra national trade) o Often o Specialize in comp. adv. o Trade o Can make whole world economy more productive o If your country can produce more cheaply (comp. adv.) o (your price < world price) o If a different country can produce more cheaply, import...
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This note was uploaded on 04/19/2011 for the course EC 201 taught by Professor Ballard during the Fall '08 term at University of Michigan.
- Fall '08