differences in supply and demand at different wages.

FIGURE 4.4 A Living Wage: Example of a Price Floor The original equilibrium in this labor market is a wage of $10/

hour and a quantity of 1,200 workers, shown at point E. Imposing a wage floor at $12/hour leads to an excess

supply of labor. At that wage, the quantity of labor supplied is 1,600 and the quantity of labor demanded is only 700.

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4.1 • Demand and Supply at Work in Labor Markets 95

Wage Quantity Labor Demanded Quantity Labor Supplied

$8/hr

1,900

$9/hr

1,500

$10/hr 1,200

$11/hr 900

$12/hr 700

$13/hr 500

$14/hr 400

500

900

1,200

1,400

1,600

1,800

1,900

TABLE 4.4 Living Wage: Example of a Price Floor

The Minimum Wage as an Example of a Price Floor

The U.S. minimum wage is a price floor that is set either very close to the equilibrium wage or even slightly

below it. About 1.5% of hourly workers in the U.S. are paid the minimum wage. In other words, the vast
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