What is binding minimum wage?
Understand the Problem
The question is asking for an explanation of what a binding minimum wage is, likely seeking to understand its implications and effects on labor markets and economics.
Answer
A minimum wage set above the equilibrium wage.
A binding minimum wage is a minimum wage set by the government that is above the equilibrium wage in the labor market. This means the wage rate is higher than what would naturally be set by the supply and demand for labor.
Answer for screen readers
A binding minimum wage is a minimum wage set by the government that is above the equilibrium wage in the labor market. This means the wage rate is higher than what would naturally be set by the supply and demand for labor.
More Information
A binding minimum wage often leads to a surplus of labor, causing unemployment because the wage set is above what would balance supply and demand in the market.
Tips
It is a common mistake to confuse a binding minimum wage with a non-binding one. Remember, a binding minimum wage is set above the equilibrium wage.
Sources
- What clears the market of a binding minimum wage? - homework.study.com
- The Minimum Wage and the Labor Market - clevelandfed.org
- Binding Minimum Wage and the Labor Market | EssayRevisor.com - essayrevisor.com
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