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Ceteris Paribus

Macroeconomics: Binding price floor

Macroeconomics: Binding price floor

E is the equilibrium wage level when there is no binding minimum wage. When a minimum wage is imposed, ceteris paribus, suppliers of labor are willing to provide more labor than firms (demand for labor) are willing to purchase at the binding minimum wage rate. There is no shifting of either curve related to behavior influenced by the higher wage rate because ceteris paribus is holding labor-leisure trade-off (of workers) and substitution of labor (by firms) constant, along with other potential influencing variables.

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    "Surplus from Price Floor."
    http://en.wikipedia.org/wiki/File:Surplus_from_Price_Floor.svg Wikipedia Public domain.

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