Question from Chapter 1, Applications of Demand and Supply

  1. During World War II there was a freeze on wages, and corporations found they could evade the freeze by providing other fringe benefits such as retirement funds and health insurance for their employees. The Office of Price Administration, which administered the wage freeze, ruled that the offer of retirement funds and health literature was not a violation of the freeze. The Internal Revenue Service went along with this and ruled that employer-financed retirement and health insurance plans were not taxable income. Was the wage freeze an example of a price floor or a price ceiling? Use the model of demand and supply to explain why employers began to offer such benefits to their employees.
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