Under what circumstances would a minimum wage be a nonbinding price floor? Under what circumstances would a living wage be a binding price floor?

Minimum wage and price floor: Minimum wage is defined as the smallest amount of remuneration in terms of salary that an employer is required to pay an employee for work completed in a given period and that cannot be renegotiated or reduced by an individual contract or collective agreement. Its primary and single objective is to protect workers from unfairly low pay and to prevent companies from abusing desperate people. The price floor, on the other hand, is a type of price control mechanism devised by the government to determine the lowest price that suppliers can charge.

A price floor is an example of the minimum wage. If the minimum wage is set higher than the equilibrium wage, a labor surplus will emerge. The minimum wage, on the other hand, will have no effect on the market wage if it is nonbinding. Price floors are so important when they are set higher than the equilibrium price. The living wage-price floor must be set higher than the equilibrium wage to be binding. Assume the US economy begins to develop at a faster rate than the rest of the globe.

Therefore, to be nonbinding, a minimum wage must be set below the equilibrium wage. The living wage-price floor must be set higher than the equilibrium wage to be legally binding.