[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

ment is concerned with low wages paid to unskilled workers, it can try to increase
the demand for these workers. A shift to the right in the demand curve will increase
their price—that is, the wages they receive. The government can either subsidize
firms that hire unskilled workers or provide more training to these workers and
thus increase their productivity.
If the government wants to increase the supply of housing to the poor, it can provide
them with housing subsidies, which will elicit a greater supply. If the government
wants drivers to conserve on the use of gasoline, it can impose a tax on gasoline.
Noneconomists often object that these sorts of economic incentives have other distasteful
consequences, and sometimes they do. But government policies will tend
to be more effective, with fewer unfortunate side effects, when they take into account
the law of supply and demand rather than ignoring its predictable economic
consequences.
Price
floor
Demand
Supply
PRICE
Excess supply
QUANTITY OF WHEAT
Figure 4.11
PRICE FLOORS
If the government imposes a price floor on, say, wheat—at a price in excess of the market
equilibrium—there will be excess supply. Either the government will have to purchase the
excess, to be stored or somehow disposed of, or it will have to limit production.
INTERFERING WITH THE LAW OF SUPPLY AND DEMAND ∂ 95