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