Answer to Question #76857 in Economics for SHEHZAAD

Question

5.1 With the aid of diagrams differentiate between a price ceiling and a price floor as government intervention measures to market failure. (12 marks)
5.2 Explain which one of the above market control measures is applicable in the labour market and justify why it is important. (8 marks

Answer 1

5.1 A price ceiling is the highest allowed price and a price floor is the lowest allowed price, which are possible tools of government intervention to fix some market failures.
5.2 Price floor or minimal wage rate is applicable in the labour market to support low-skilled employees.