Definition
- Binding price floor
- A price floor is binding when it sits above the equilibrium wage and so determines the market outcome.
- Not to be confused with: Minimum wage
- A minimum wage is a price floor that makes it illegal for an employer to pay less than a set hourly rate.
Test yourself
What is the difference between binding price floor and minimum wage?
Minimum wage: A minimum wage is a price floor that makes it illegal for an employer to pay less than a set hourly rate.