Chap5microF11 - A REVIEW OF CHANGES IN SUPPLY AND DEMAND...

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A REVIEW OF CHANGES IN SUPPLY AND DEMAND FROM DAVID COLANDER No change  in Supply Supply shifts out Supply shifts in No change  in Demand No Change Price falls, Quantity rises Price rises,  Quantity falls Demand  shifts out Price rises, Quantity rises Quantity rises,  Price could rise  or fall Price rises,  Quantity could  rise or fall Demand  shifts in Price falls, Quantity falls Price falls,  Quantity could  rise or fall Quantity falls,  Price could rise  or fall 5-1
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Controls on Price Price Ceiling - a government mandated  maximum price above which legal trades  cannot be made. Impact: Creates a shortage of the good. Alternative rationing methods must be employed. Examples of Price Ceilings Lines at the Gas Pump Rent Controls
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Controls on Price, cont. Price floor - a government mandated  minimum price below which legal trades  cannot be made. Impact: Creates a surplus of the good. Example: The Minimum Wage,  Agriculture Policy of the Federal  Government
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The History of the Federal Minimum Wage Fair Labor Standards Act of 1938 Set the minimum wage at $0.25. The federal minimum wage is not indexed to  inflation.  The wage only rises when Congress  acts. Consequently, the purchasing power of the  wage declines in between the times Congress  has raised its value. UNDERSTAND THE STANDARD  ILLUSTRATION OF THE MINIMUM WAGE
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Minimum Wage Websites Department of Labor Minimum Wage Information State Minimum Wages History of Minimum Wage
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Problems in estimating the impact of the minimum wage 1. Nominal vs. Real wages: Cost of living must be  adjusted over time and across economic regions.  The lower the cost of living, the greater the  impact of a minimum wage.
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