[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:00.19,0:00:02.98,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:00:08.93,0:00:10.36,Default,,0000,0000,0000,,- [Alex] In the next two videos,
Dialogue: 0,0:00:10.36,0:00:13.50,Default,,0000,0000,0000,,we'll turn our attention \Nto price floors and their effects.
Dialogue: 0,0:00:13.50,0:00:15.90,Default,,0000,0000,0000,,In this video, we'll look at \Nthe first two effects
Dialogue: 0,0:00:15.90,0:00:18.58,Default,,0000,0000,0000,,and cover one of the most \Nwell-known price floors:
Dialogue: 0,0:00:18.58,0:00:19.92,Default,,0000,0000,0000,,the minimum wage.
Dialogue: 0,0:00:19.92,0:00:21.76,Default,,0000,0000,0000,,Let's get started.
Dialogue: 0,0:00:25.30,0:00:29.02,Default,,0000,0000,0000,,A price floor is a minimum price \Nallowed by law.
Dialogue: 0,0:00:29.02,0:00:32.28,Default,,0000,0000,0000,,That is, it is a price \Nbelow which it is illegal
Dialogue: 0,0:00:32.28,0:00:33.91,Default,,0000,0000,0000,,to buy or sell,
Dialogue: 0,0:00:33.91,0:00:35.01,Default,,0000,0000,0000,,called a price floor
Dialogue: 0,0:00:35.01,0:00:38.30,Default,,0000,0000,0000,,because you cannot go\Nbelow the floor.
Dialogue: 0,0:00:39.06,0:00:41.11,Default,,0000,0000,0000,,We're going to show \Nthat price floors create
Dialogue: 0,0:00:41.11,0:00:42.44,Default,,0000,0000,0000,,four significant effects:
Dialogue: 0,0:00:42.44,0:00:49.44,Default,,0000,0000,0000,,surpluses, lost gains from trade, \Nwasteful increases in quality,
Dialogue: 0,0:00:49.44,0:00:51.36,Default,,0000,0000,0000,,and a misallocation of resources.
Dialogue: 0,0:00:51.36,0:00:53.07,Default,,0000,0000,0000,,We're going to go through \Nthese each in turn.
Dialogue: 0,0:00:53.07,0:00:54.57,Default,,0000,0000,0000,,Before we do so, however,
Dialogue: 0,0:00:54.57,0:00:57.29,Default,,0000,0000,0000,,it's worthwhile\Nasking this question:
Dialogue: 0,0:00:57.29,0:01:00.87,Default,,0000,0000,0000,,price floors are less common \Nthan price ceilings --
Dialogue: 0,0:01:00.87,0:01:02.23,Default,,0000,0000,0000,,why is this?
Dialogue: 0,0:01:02.23,0:01:06.10,Default,,0000,0000,0000,,That is it's more common \Nto see a price being held
Dialogue: 0,0:01:06.10,0:01:09.14,Default,,0000,0000,0000,,below the market price,
Dialogue: 0,0:01:09.14,0:01:14.32,Default,,0000,0000,0000,,than it is to see a price \Nbeing held above the market price.
Dialogue: 0,0:01:15.07,0:01:16.19,Default,,0000,0000,0000,,Why?
Dialogue: 0,0:01:17.11,0:01:19.28,Default,,0000,0000,0000,,One reason may be political.
Dialogue: 0,0:01:19.28,0:01:23.74,Default,,0000,0000,0000,,That is, there are typically\Nmore buyers of goods
Dialogue: 0,0:01:23.74,0:01:26.86,Default,,0000,0000,0000,,than there are sellers of goods.
Dialogue: 0,0:01:26.86,0:01:30.57,Default,,0000,0000,0000,,So when you hold a price \Nbelow the market price,
Dialogue: 0,0:01:30.57,0:01:33.59,Default,,0000,0000,0000,,you may benefit, or at least \Nappear to benefit,
Dialogue: 0,0:01:33.59,0:01:37.80,Default,,0000,0000,0000,,more buyers,\Nmore people, more voters
Dialogue: 0,0:01:37.80,0:01:42.02,Default,,0000,0000,0000,,than when you hold a price \Nabove the market price,
Dialogue: 0,0:01:42.02,0:01:45.15,Default,,0000,0000,0000,,which would appear to harm buyers.
Dialogue: 0,0:01:45.15,0:01:47.80,Default,,0000,0000,0000,,Now interestingly,\Nthe paradigmatic,
Dialogue: 0,0:01:47.80,0:01:50.24,Default,,0000,0000,0000,,the classic case of a price floor
Dialogue: 0,0:01:50.24,0:01:53.16,Default,,0000,0000,0000,,is the exception\Nwhich proves the rule.
Dialogue: 0,0:01:53.16,0:01:56.77,Default,,0000,0000,0000,,Because the classic case \Nof a price floor is a good
Dialogue: 0,0:01:56.77,0:02:01.68,Default,,0000,0000,0000,,for which there are more sellers \Nthan there are buyers.
Dialogue: 0,0:02:01.68,0:02:06.42,Default,,0000,0000,0000,,So here's the case where the price \Nis kept above the market price,
Dialogue: 0,0:02:06.42,0:02:10.26,Default,,0000,0000,0000,,and it make sense politically \Nbecause there are lots of sellers
Dialogue: 0,0:02:10.26,0:02:12.02,Default,,0000,0000,0000,,compared to buyers.
Dialogue: 0,0:02:12.02,0:02:16.27,Default,,0000,0000,0000,,So, what is this good,\Nfor which price floor is common
Dialogue: 0,0:02:16.27,0:02:19.18,Default,,0000,0000,0000,,and for which sellers exceed buyers?
Dialogue: 0,0:02:19.18,0:02:21.05,Default,,0000,0000,0000,,We'll get to that in just a moment.
Dialogue: 0,0:02:21.05,0:02:22.44,Default,,0000,0000,0000,,Think about it.
Dialogue: 0,0:02:22.44,0:02:24.49,Default,,0000,0000,0000,,So one of the things \Nwhich a price floor does
Dialogue: 0,0:02:24.49,0:02:26.51,Default,,0000,0000,0000,,is it creates surpluses.
Dialogue: 0,0:02:26.51,0:02:30.37,Default,,0000,0000,0000,,Okay. Have you thought of the good\Nwhich a price floor is common,
Dialogue: 0,0:02:30.37,0:02:32.63,Default,,0000,0000,0000,,and it's a good for which \Nthe number of suppliers
Dialogue: 0,0:02:32.63,0:02:34.94,Default,,0000,0000,0000,,exceeds the number of buyers?
Dialogue: 0,0:02:35.63,0:02:38.93,Default,,0000,0000,0000,,Well, the minimum wage \Nis a price floor.
Dialogue: 0,0:02:38.93,0:02:44.20,Default,,0000,0000,0000,,The minimum wage is a price \Nbelow which you cannot sell labor,
Dialogue: 0,0:02:44.20,0:02:47.88,Default,,0000,0000,0000,,and the suppliers of labor \Nexceed the buyers of labor.
Dialogue: 0,0:02:47.88,0:02:50.23,Default,,0000,0000,0000,,So it's not surprising\Nthat a minimum wage
Dialogue: 0,0:02:50.23,0:02:52.80,Default,,0000,0000,0000,,is often politically successful.
Dialogue: 0,0:02:52.80,0:02:54.97,Default,,0000,0000,0000,,Now, who will\Nthe minimum wage affect?
Dialogue: 0,0:02:54.97,0:02:56.76,Default,,0000,0000,0000,,Workers with very high productivity
Dialogue: 0,0:02:56.76,0:02:58.87,Default,,0000,0000,0000,,who are already earning\Nmore than the minimum wage –
Dialogue: 0,0:02:58.87,0:03:01.98,Default,,0000,0000,0000,,they are not going to be affected \Nby the minimum wage perhaps at all.
Dialogue: 0,0:03:01.98,0:03:04.37,Default,,0000,0000,0000,,Instead, it will affect \Nthe least experienced,
Dialogue: 0,0:03:04.37,0:03:07.29,Default,,0000,0000,0000,,least educated, least trained workers.
Dialogue: 0,0:03:07.29,0:03:11.09,Default,,0000,0000,0000,,Low-skilled teenagers, for example, \Nare most likely to be affected
Dialogue: 0,0:03:11.09,0:03:12.89,Default,,0000,0000,0000,,by the minimum wage.
Dialogue: 0,0:03:12.89,0:03:16.48,Default,,0000,0000,0000,,Now, I said that a price floor\Ncreates surpluses.
Dialogue: 0,0:03:16.48,0:03:20.15,Default,,0000,0000,0000,,The minimum wage is a price floor,\Nso it's going to create a surplus.
Dialogue: 0,0:03:20.15,0:03:23.26,Default,,0000,0000,0000,,A surplus of labor, we call what?
Dialogue: 0,0:03:23.26,0:03:24.85,Default,,0000,0000,0000,,We say a gaggle of geese?
Dialogue: 0,0:03:24.85,0:03:26.53,Default,,0000,0000,0000,,Say pride of lions?
Dialogue: 0,0:03:26.53,0:03:30.43,Default,,0000,0000,0000,,A surplus of labor\Nis called unemployment.
Dialogue: 0,0:03:30.43,0:03:32.22,Default,,0000,0000,0000,,So let's look with our model
Dialogue: 0,0:03:32.22,0:03:36.10,Default,,0000,0000,0000,,to understand how a minimum wage\Ncan create unemployment,
Dialogue: 0,0:03:36.10,0:03:39.45,Default,,0000,0000,0000,,particularly among\Nthe least skilled workers.
Dialogue: 0,0:03:39.45,0:03:41.12,Default,,0000,0000,0000,,Okay. Here's our standard diagram,
Dialogue: 0,0:03:41.12,0:03:43.07,Default,,0000,0000,0000,,except we're going to put \Nthe quantity of labor,
Dialogue: 0,0:03:43.07,0:03:46.00,Default,,0000,0000,0000,,especially unskilled labor,\Non the horizontal axis.
Dialogue: 0,0:03:46.00,0:03:48.93,Default,,0000,0000,0000,,The wage or the price of labor \Non the vertical axis --
Dialogue: 0,0:03:48.93,0:03:50.27,Default,,0000,0000,0000,,there's our supply curve.
Dialogue: 0,0:03:50.27,0:03:53.24,Default,,0000,0000,0000,,There's our demand curve\Nwith the market wage
Dialogue: 0,0:03:53.24,0:03:55.12,Default,,0000,0000,0000,,and the market employment level.
Dialogue: 0,0:03:55.12,0:03:56.76,Default,,0000,0000,0000,,Now we're going to add\Nthe minimum wage.
Dialogue: 0,0:03:56.76,0:03:58.04,Default,,0000,0000,0000,,This is a price floor
Dialogue: 0,0:03:58.04,0:04:03.34,Default,,0000,0000,0000,,below which it is illegal to buy \Nor sell this good: labor.
Dialogue: 0,0:04:03.34,0:04:07.15,Default,,0000,0000,0000,,Now we just read the consequences \Nof the price floor of the diagram.
Dialogue: 0,0:04:07.15,0:04:08.46,Default,,0000,0000,0000,,So we read, for example,
Dialogue: 0,0:04:08.46,0:04:13.31,Default,,0000,0000,0000,,that at the minimum wage, \Nthe quantity of labor demanded
Dialogue: 0,0:04:13.31,0:04:15.06,Default,,0000,0000,0000,,is read off the demand curve.
Dialogue: 0,0:04:15.06,0:04:17.32,Default,,0000,0000,0000,,Remember, this is\Nthe demand for labor.
Dialogue: 0,0:04:17.32,0:04:20.04,Default,,0000,0000,0000,,So this is the quantity\Nof labor demanded,
Dialogue: 0,0:04:20.04,0:04:23.34,Default,,0000,0000,0000,,and at the minimum wage, \Nthe quantity of labor supplied
Dialogue: 0,0:04:23.34,0:04:25.60,Default,,0000,0000,0000,,is read off the supply curve.
Dialogue: 0,0:04:25.60,0:04:28.55,Default,,0000,0000,0000,,Let's put that point on,\Nthat's "Qs."
Dialogue: 0,0:04:28.55,0:04:31.82,Default,,0000,0000,0000,,So we have Qs units\Nof labor supplied,
Dialogue: 0,0:04:31.82,0:04:34.66,Default,,0000,0000,0000,,"Qd" units of labor demanded.
Dialogue: 0,0:04:34.66,0:04:36.94,Default,,0000,0000,0000,,Qs is bigger than Qd,
Dialogue: 0,0:04:36.94,0:04:41.74,Default,,0000,0000,0000,,so the difference between them \Nis a surplus of labor,
Dialogue: 0,0:04:41.74,0:04:44.75,Default,,0000,0000,0000,,also known as unemployment.
Dialogue: 0,0:04:46.89,0:04:48.88,Default,,0000,0000,0000,,Now the minimum wage\Nis a controversial
Dialogue: 0,0:04:48.88,0:04:51.27,Default,,0000,0000,0000,,and hotly debated issue.
Dialogue: 0,0:04:51.27,0:04:53.38,Default,,0000,0000,0000,,Some academic results indicate
Dialogue: 0,0:04:53.38,0:04:56.12,Default,,0000,0000,0000,,that the unemployment effect \Nof a modest increase
Dialogue: 0,0:04:56.12,0:04:57.29,Default,,0000,0000,0000,,in the minimum wage
Dialogue: 0,0:04:57.29,0:04:59.63,Default,,0000,0000,0000,,would not be substantial.
Dialogue: 0,0:04:59.63,0:05:02.45,Default,,0000,0000,0000,,At the same time, however, \Nwe also have to recognize
Dialogue: 0,0:05:02.45,0:05:04.88,Default,,0000,0000,0000,,that a modest increase\Nin the minimum wage
Dialogue: 0,0:05:04.88,0:05:07.34,Default,,0000,0000,0000,,would not have big benefits either.
Dialogue: 0,0:05:07.34,0:05:09.30,Default,,0000,0000,0000,,First, only a small percentage\Nof workers
Dialogue: 0,0:05:09.30,0:05:11.42,Default,,0000,0000,0000,,are going to be affected\Nby the minimum wage.
Dialogue: 0,0:05:11.42,0:05:17.00,Default,,0000,0000,0000,,97% or so of workers already earn \Nmore than the minimum wage.
Dialogue: 0,0:05:17.00,0:05:19.14,Default,,0000,0000,0000,,In fact, even among young workers,
Dialogue: 0,0:05:19.14,0:05:22.52,Default,,0000,0000,0000,,94% or so less than 25 years of age,
Dialogue: 0,0:05:22.52,0:05:25.07,Default,,0000,0000,0000,,they already earn\Nmore than the minimum wage.
Dialogue: 0,0:05:25.07,0:05:28.06,Default,,0000,0000,0000,,At best, the minimum wage \Nwill raise the wages
Dialogue: 0,0:05:28.06,0:05:30.35,Default,,0000,0000,0000,,of some low-skilled\Nand young workers,
Dialogue: 0,0:05:30.35,0:05:33.38,Default,,0000,0000,0000,,most of whose wages \Nwould have increased anyway
Dialogue: 0,0:05:33.38,0:05:35.94,Default,,0000,0000,0000,,as they became more skilled.
Dialogue: 0,0:05:35.94,0:05:37.33,Default,,0000,0000,0000,,At worst, the minimum wage
Dialogue: 0,0:05:37.33,0:05:39.24,Default,,0000,0000,0000,,will increase the price\Nof a hamburger,
Dialogue: 0,0:05:39.24,0:05:41.52,Default,,0000,0000,0000,,create some unemployment,
Dialogue: 0,0:05:41.52,0:05:45.41,Default,,0000,0000,0000,,and/or keep some teenagers \Nin school for a bit longer --
Dialogue: 0,0:05:45.41,0:05:48.11,Default,,0000,0000,0000,,mot all necessarily bad things.
Dialogue: 0,0:05:48.62,0:05:49.65,Default,,0000,0000,0000,,What, however,
Dialogue: 0,0:05:49.65,0:05:52.22,Default,,0000,0000,0000,,about a larger increase \Nin the minimum wage?
Dialogue: 0,0:05:53.05,0:05:54.40,Default,,0000,0000,0000,,Few economists doubt
Dialogue: 0,0:05:54.40,0:05:56.35,Default,,0000,0000,0000,,that a large increase\Nin the minimum wage
Dialogue: 0,0:05:56.35,0:05:59.29,Default,,0000,0000,0000,,would cause serious unemployment.
Dialogue: 0,0:05:59.29,0:06:03.14,Default,,0000,0000,0000,,After all, we could\Nnot create prosperity
Dialogue: 0,0:06:03.14,0:06:05.69,Default,,0000,0000,0000,,by raising the minimum wage \Nhigher and higher.
Dialogue: 0,0:06:05.69,0:06:08.36,Default,,0000,0000,0000,,If a minimum wage of $10\Nan hour is a good idea,
Dialogue: 0,0:06:08.36,0:06:09.58,Default,,0000,0000,0000,,what about 15?
Dialogue: 0,0:06:09.58,0:06:11.89,Default,,0000,0000,0000,,What about 20, 25, $100?
Dialogue: 0,0:06:11.89,0:06:13.75,Default,,0000,0000,0000,,$500 an hour?
Dialogue: 0,0:06:13.75,0:06:15.66,Default,,0000,0000,0000,,Would we all be rich at that point?
Dialogue: 0,0:06:15.66,0:06:18.86,Default,,0000,0000,0000,,Would we all be receiving wages \Nof $500 an hour?
Dialogue: 0,0:06:18.86,0:06:19.92,Default,,0000,0000,0000,,Of course not.
Dialogue: 0,0:06:19.92,0:06:22.56,Default,,0000,0000,0000,,Most of us would be unemployed.
Dialogue: 0,0:06:22.56,0:06:24.50,Default,,0000,0000,0000,,So a large increase\Nin the minimum wage
Dialogue: 0,0:06:24.50,0:06:26.22,Default,,0000,0000,0000,,is going to cause\Nserious unemployment,
Dialogue: 0,0:06:26.22,0:06:29.68,Default,,0000,0000,0000,,and the good example of this \Nis Puerto Rico in 1938.
Dialogue: 0,0:06:29.68,0:06:32.83,Default,,0000,0000,0000,,Congress actually set \Nthe first minimum wage at this time
Dialogue: 0,0:06:32.83,0:06:35.18,Default,,0000,0000,0000,,at 25 cents an hour.
Dialogue: 0,0:06:35.18,0:06:36.98,Default,,0000,0000,0000,,Now that may seem low,\Nbut that's at a time
Dialogue: 0,0:06:36.98,0:06:39.37,Default,,0000,0000,0000,,when the average wage\Nin the United States
Dialogue: 0,0:06:39.37,0:06:41.39,Default,,0000,0000,0000,,was still less than\Na dollar an hour,
Dialogue: 0,0:06:41.39,0:06:44.20,Default,,0000,0000,0000,,was 62 and a half cents an hour.
Dialogue: 0,0:06:44.20,0:06:47.48,Default,,0000,0000,0000,,Congress, however,\Nforgot to exempt Puerto Rico.
Dialogue: 0,0:06:47.48,0:06:50.28,Default,,0000,0000,0000,,When the average wages \Nin Puerto Rico at that time
Dialogue: 0,0:06:50.28,0:06:53.63,Default,,0000,0000,0000,,were much lower than in the rest \Nof the United States,
Dialogue: 0,0:06:53.63,0:06:56.12,Default,,0000,0000,0000,,only three cents\Nto four cents an hour.
Dialogue: 0,0:06:56.12,0:06:59.43,Default,,0000,0000,0000,,So this modest increase \Nin the minimum wage
Dialogue: 0,0:06:59.43,0:07:01.93,Default,,0000,0000,0000,,for the continental United States
Dialogue: 0,0:07:01.93,0:07:05.49,Default,,0000,0000,0000,,was a huge increase\Nin the minimum wage for Puerto Rico.
Dialogue: 0,0:07:05.49,0:07:08.47,Default,,0000,0000,0000,,And lots of Puerto Rican firms\Nwent bankrupt,
Dialogue: 0,0:07:08.47,0:07:10.65,Default,,0000,0000,0000,,it created devastating unemployment.
Dialogue: 0,0:07:10.65,0:07:14.22,Default,,0000,0000,0000,,In fact, Puerto Rican politicians \Ncame to Washington
Dialogue: 0,0:07:14.22,0:07:18.84,Default,,0000,0000,0000,,to beg for an exemption \Nto get them out of the minimum wage.
Dialogue: 0,0:07:18.84,0:07:21.06,Default,,0000,0000,0000,,So, a large increase\Nin the minimum wage
Dialogue: 0,0:07:21.06,0:07:25.84,Default,,0000,0000,0000,,would certainly cause substantial \Nand serious unemployment.
Dialogue: 0,0:07:25.84,0:07:28.29,Default,,0000,0000,0000,,We do see higher minimum wages \Nin other countries.
Dialogue: 0,0:07:28.29,0:07:31.21,Default,,0000,0000,0000,,The minimum wage in France \Nis higher than the U.S.,
Dialogue: 0,0:07:31.21,0:07:34.20,Default,,0000,0000,0000,,relative to average wages \Nin those two countries.
Dialogue: 0,0:07:34.20,0:07:36.14,Default,,0000,0000,0000,,In addition, labor laws in France
Dialogue: 0,0:07:36.14,0:07:38.53,Default,,0000,0000,0000,,make it very difficult\Nto fire workers
Dialogue: 0,0:07:38.53,0:07:40.56,Default,,0000,0000,0000,,once they have been hired.
Dialogue: 0,0:07:40.56,0:07:42.14,Default,,0000,0000,0000,,As a result, firms in France
Dialogue: 0,0:07:42.14,0:07:45.76,Default,,0000,0000,0000,,are very reluctant\Nto hire new workers.
Dialogue: 0,0:07:45.76,0:07:48.11,Default,,0000,0000,0000,,Younger workers\Nare especially affected
Dialogue: 0,0:07:48.11,0:07:49.96,Default,,0000,0000,0000,,because they are less productive,
Dialogue: 0,0:07:49.96,0:07:52.72,Default,,0000,0000,0000,,and also they are\Nless known commodities.
Dialogue: 0,0:07:52.72,0:07:55.52,Default,,0000,0000,0000,,So, the risk\Nof hiring them is greater.
Dialogue: 0,0:07:55.52,0:07:58.81,Default,,0000,0000,0000,,As a result, unemployment\Namong young workers
Dialogue: 0,0:07:58.81,0:08:00.37,Default,,0000,0000,0000,,is very high in France.
Dialogue: 0,0:08:00.37,0:08:03.53,Default,,0000,0000,0000,,It was 23% in 2005,
Dialogue: 0,0:08:03.53,0:08:06.56,Default,,0000,0000,0000,,and that was long before \Nthe economic crisis,
Dialogue: 0,0:08:06.56,0:08:09.58,Default,,0000,0000,0000,,the financial crisis \Naffecting the entire world.
Dialogue: 0,0:08:09.58,0:08:11.37,Default,,0000,0000,0000,,So even during good times,
Dialogue: 0,0:08:11.37,0:08:15.62,Default,,0000,0000,0000,,unemployment in France \Namong young workers is very high,
Dialogue: 0,0:08:15.62,0:08:17.23,Default,,0000,0000,0000,,because the minimum wage is high,
Dialogue: 0,0:08:17.23,0:08:19.72,Default,,0000,0000,0000,,and because firms\Ndon't want to hire,
Dialogue: 0,0:08:19.72,0:08:23.22,Default,,0000,0000,0000,,given how difficult it is \Nto fire workers.
Dialogue: 0,0:08:23.22,0:08:25.22,Default,,0000,0000,0000,,Okay. Let's also show\Nthat the minimum wage
Dialogue: 0,0:08:25.22,0:08:26.100,Default,,0000,0000,0000,,creates lost gains from trade --
Dialogue: 0,0:08:26.100,0:08:29.31,Default,,0000,0000,0000,,this ought to be\Nfairly familiar by now.
Dialogue: 0,0:08:29.31,0:08:32.03,Default,,0000,0000,0000,,At the minimum wage, \Nthe quantity of labor demanded
Dialogue: 0,0:08:32.03,0:08:34.15,Default,,0000,0000,0000,,is given by Qd.
Dialogue: 0,0:08:34.15,0:08:38.06,Default,,0000,0000,0000,,That is less than the quantity \Nof labor which would be traded
Dialogue: 0,0:08:38.06,0:08:41.92,Default,,0000,0000,0000,,given the market wage,\Nthis market employment.
Dialogue: 0,0:08:41.92,0:08:46.73,Default,,0000,0000,0000,,Key point is that \Nthere are buyers of labor
Dialogue: 0,0:08:46.73,0:08:51.27,Default,,0000,0000,0000,,who are willing to buy labor \Nat a price below the minimum wage,
Dialogue: 0,0:08:51.27,0:08:53.61,Default,,0000,0000,0000,,and there are suppliers of labor,
Dialogue: 0,0:08:53.61,0:08:57.63,Default,,0000,0000,0000,,workers who are willing \Nto work below the minimum wage.
Dialogue: 0,0:08:57.63,0:09:00.72,Default,,0000,0000,0000,,These deals would be\Nmutually profitable,
Dialogue: 0,0:09:00.72,0:09:02.90,Default,,0000,0000,0000,,but they are illegal.
Dialogue: 0,0:09:02.90,0:09:05.64,Default,,0000,0000,0000,,So, there are buyers of labor
Dialogue: 0,0:09:05.64,0:09:07.68,Default,,0000,0000,0000,,who are willing to buy below \Nthe minimum wage,
Dialogue: 0,0:09:07.68,0:09:09.45,Default,,0000,0000,0000,,there are sellers willing to sell.
Dialogue: 0,0:09:09.45,0:09:11.84,Default,,0000,0000,0000,,These deals would be\Nmutually profitable,
Dialogue: 0,0:09:11.84,0:09:13.77,Default,,0000,0000,0000,,but they are illegal,\Nthey are not made.
Dialogue: 0,0:09:13.77,0:09:16.46,Default,,0000,0000,0000,,Because of that, there are lost\Ngains from trade
Dialogue: 0,0:09:16.46,0:09:18.65,Default,,0000,0000,0000,,or a deadweight loss.
Dialogue: 0,0:09:18.65,0:09:21.68,Default,,0000,0000,0000,,Okay. So, we have covered \Nthe first two effects of price floors,
Dialogue: 0,0:09:21.68,0:09:24.97,Default,,0000,0000,0000,,namely surpluses \Nand lost gains from trade.
Dialogue: 0,0:09:24.97,0:09:27.100,Default,,0000,0000,0000,,In the next lecture, we will use \Na slightly different example
Dialogue: 0,0:09:27.100,0:09:30.17,Default,,0000,0000,0000,,to look at wasteful\Nincreases in quality
Dialogue: 0,0:09:30.17,0:09:32.60,Default,,0000,0000,0000,,and a misallocation of resources.
Dialogue: 0,0:09:33.61,0:09:35.05,Default,,0000,0000,0000,,- [Narrator] If you want\Nto test yourself,
Dialogue: 0,0:09:35.05,0:09:36.69,Default,,0000,0000,0000,,click "Practice Questions."
Dialogue: 0,0:09:37.30,0:09:40.76,Default,,0000,0000,0000,,Or, if you're ready to move on, \Njust click "Next Video."
Dialogue: 0,0:09:40.76,0:09:43.25,Default,,0000,0000,0000,,♪ [music] ♪